Oil prices dropped by more than 1% on Monday after tensions in the Middle East eased, following a commitment by the United States and Iran to continue indirect negotiations over Tehran’s nuclear programme. The renewed talks helped reduce concerns about a potential regional conflict and the risk of oil supply disruptions.
Brent crude futures fell 84 cents, or 1.2%, to $67.21 per barrel by 0747 GMT, while U.S. West Texas Intermediate crude declined 82 cents, or 1.3%, to $62.73.
According to IG market analyst Tony Sycamore, expectations of further diplomatic engagement have significantly reduced immediate fears of supply interruptions in the Middle East.
Both Washington and Tehran described the latest round of discussions, held on Friday in Oman, as constructive. The continuation of talks has eased worries that a breakdown could push the region closer to military conflict, especially as the United States has increased its military presence in the area.
The Middle East remains a critical hub for global energy flows, with roughly 20% of the world’s oil consumption moving through the Strait of Hormuz between Oman and Iran.
Oil prices had already come under pressure last week, with both Brent and WTI falling more than 2%—their first weekly decline in seven weeks—as geopolitical tensions showed signs of cooling.
However, risks remain elevated. Iran’s foreign minister warned that U.S. bases in the region would be targeted if Iran were attacked, underscoring the fragile nature of the current calm.
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that oil market volatility is likely to stay high. Conflicting statements from key players mean that any negative headlines could quickly restore a risk premium to prices.
Beyond Middle East tensions, investors are also focused on Western efforts to restrict Russia’s oil revenues, which help fund its war in Ukraine. On Friday, the European Commission proposed a broad ban on services that support Russia’s seaborne crude exports.
In parallel, Indian refiners—previously among the largest buyers of Russian seaborne oil—are avoiding purchases for April delivery and are expected to remain cautious for longer. Trade sources suggest this shift could support India’s efforts to advance a trade agreement with the United States.
Sachdeva added that oil markets will remain sensitive to how sustained this move away from Russian crude proves to be, whether India’s reduced buying extends beyond April, and how quickly alternative supply routes can be established.
