Oil prices declined on Tuesday as markets digested fresh U.S. sanctions on Iran and a sharp drop in shipping traffic through the Strait of Hormuz, a critical oil transit route.
Brent crude futures fell 2.92% to $87.90 per barrel by 08:53 GMT, while U.S. West Texas Intermediate crude declined 3.11% to $82.37 per barrel. Both benchmarks had settled down more than 2% in the prior session, with WTI hovering near a one-week low as investors took profits following a multi-week rally.
The U.S. Treasury announced sanctions on Monday targeting 60 entities and individuals linked to Iran, warning global partners against economic engagement with Tehran. However, the announcement lacked specifics on implementation or penalties, and no Chinese entities were included on the list. Analysts at ING noted that oil prices drifted lower despite the renewed pressure, with traders viewing the measures as "marginal rather than market-moving."
Shipping traffic through the Strait of Hormuz, a vital chokepoint responsible for roughly one-fifth of global oil and liquefied natural gas flows prior to the late-February war, slowed to just one commodity vessel on Monday. The decline in traffic followed the U.S. sanctions announcement and marked a significant drop from pre-war levels.
Pakistan’s Interior Minister Mohsin Naqvi stated on Tuesday that "significant progress" had been made in recent talks with Iranian officials, describing the discussions as "highly positive." Naqvi emphasized a "constructive exchange" with Tehran’s leadership, though no concrete outcomes were disclosed.
Analysts at ANZ echoed the muted market reaction, stating that the announcement of an "unprecedented" campaign to isolate Iran lacked a clear timeline or actionable plans. The lack of immediate penalties or enforcement mechanisms appeared to limit the sanctions’ impact on oil markets.
The Strait of Hormuz’s traffic had already fallen to its lowest daily volume since May 7 prior to Monday’s drop, underscoring broader disruptions in regional trade flows amid ongoing geopolitical tensions.
