Oil prices slipped nearly 5% on Tuesday as markets absorbed fresh U.S. sanctions targeting 60 entities and individuals linked to Iran, while traders took profits following weeks of gains. Brent crude futures for November expiry fell 5% to settle at $86.06 per barrel, while U.S. West Texas Intermediate crude for October expiry declined 4.6% to $81.07 per barrel.
The declines extended losses from the prior session, when both benchmarks settled more than 2% lower. WTI crude was trading near a one-week low, reflecting profit-taking after a sustained rally. The latest drop followed a report from Russia’s RIA Novosti, citing Pakistani and Iranian military sources, that the U.S. and Iran had reached a ceasefire agreement. The report contributed to the late-session selloff on Wall Street.
The Trump administration announced the new sanctions on Monday, warning that any state conducting business with Iran risked penalties. U.S. Treasury Secretary Scott Bessent described the measures as part of an "unprecedented" campaign to isolate Iran from the global economy, stating that Tehran’s leadership was "panicking" in response. However, analysts at ING and ANZ noted that traders viewed the announcement as largely symbolic, with no immediate timeline for enforcement or specific actions outlined.
ING analysts said the market treated the U.S. effort to pressure partners into reducing Iranian trade as "marginal rather than market-moving." ANZ analysts echoed this sentiment, citing the lack of concrete details as a key reason for the muted market reaction. The targeted sanctions did not include any entities from China, the largest buyer of Iranian energy, raising questions over whether Washington would risk tensions with Beijing over secondary sanctions.
Earlier this month, Iran and Oman discussed resuming safe navigation through the Strait of Hormuz, a critical oil transit route. The strait has been a flashpoint in recent weeks, with Iran threatening to disrupt oil flows in response to perceived U.S. aggression. The prior June memorandum of understanding aimed at halting hostilities had collapsed following attacks on tankers in the strait.
Pakistan’s Interior Minister Mohsin Naqvi said Islamabad and Tehran had made "significant progress" in discussions over a potential interim ceasefire deal with the U.S., describing the meeting as "highly positive." The comments suggested ongoing diplomatic efforts to de-escalate tensions in the region, though their direct impact on oil markets remained limited.
