Oil prices declined on Tuesday, reversing sharp gains from the previous session, as expectations of imminent US-Iran peace talks eased concerns over prolonged supply disruptions from the Middle East.Brent crude futures fell 95 cents, or 1%, to $94.53 per barrel, while US West Texas Intermediate (WTI) crude for May dropped $1.54, or 1.72%, to $88.07. The more active June WTI contract was also down 1.3% at $86.37.
Gains reversed after Strait tensions spike
The dip comes after a surge on Monday, when Brent jumped 5.6% and WTI climbed 6.9% following Iran’s renewed closure of the Strait of Hormuz and the US seizure of an Iranian cargo vessel under its blockade.Despite the ongoing disruptions, investors are focusing on the likelihood that talks in Pakistan this week could lead to an extension of the current ceasefire or even a broader agreement, which may allow oil flows to resume.
Uncertainty over Iran’s participation
However, uncertainty persists as Tehran has not yet confirmed its participation in the negotiations. A senior Iranian official said the country is still weighing its options, while foreign minister Abbas Araqchi cited “continued violations of the ceasefire” by the US as a key obstacle, according to Reuters.Iran’s parliament speaker Mohammad Baqer Qalibaf also reiterated that Tehran would not engage in talks “under threats,” highlighting the fragile diplomatic environment.
Supply risks remain, analysts warn
Shipping through the Strait of Hormuz — which carries about one-fifth of global oil supply — remained limited, raising concerns over sustained disruptions. Analysts at Citi said they expect a ceasefire extension or memorandum of understanding this week but warned of a “more protracted disruption scenario” if talks fail, as per Reuters.They added that prolonged disruption could result in losses of up to 1.3 billion barrels and push prices towards $110 per barrel in the second quarter of 2026.Meanwhile, Kuwait has declared force majeure on oil shipments due to the blockade, and higher prices have already reduced global oil demand by about 3%, according to Societe Generale.
