Oil Falls as U.S.–Iran Nuclear Talks Reduce Risk

Key Moments

Market Overview

Oil prices retreated by 1% on Monday as signs of ongoing diplomatic engagement between the United States and Iran reduced immediate concerns about a broader conflict in the Middle East and its potential impact on crude supplies.

Brent crude futures slipped 67 cents, or 1%, to $67.38 a barrel by 0444 GMT. U.S. West Texas Intermediate (WTI) crude declined 61 cents, also 1%, to $62.94 a barrel.

Middle East Risk Premium Eases, But Tensions Persist

The pullback in prices followed a weekend in which Washington and Tehran committed to keep pursuing indirect discussions on Iran’s nuclear program. Both sides described the latest talks in Oman on Friday as positive, even as differences remained.

“With more talks on the horizon the immediate fear of supply disruptions in the Middle East has eased quite a bit,” IG market analyst Tony Sycamore said.

The agreement to continue dialogue eased worries that a breakdown in negotiations could push the region closer to open conflict, particularly as the United States has moved additional military assets into the area.

Despite the reduction in immediate anxiety, geopolitical risks have not disappeared. Iran’s foreign minister stated on Saturday that Tehran would target U.S. bases in the Middle East if it comes under attack from U.S. forces, underscoring that the potential for escalation remains.

“Volatility remains elevated as conflicting rhetoric persists. Any negative headlines could quickly reignite risk premiums in oil prices this week,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Strategic Chokepoint Keeps Supply Risks in Focus

Market participants continued to monitor potential supply vulnerabilities in the region. Flows equal to about a fifth of global oil consumption move through the Strait of Hormuz, the narrow waterway between Oman and Iran that is central to exports from Iran and other regional producers.

Both Brent and WTI benchmarks had already dropped more than 2% last week as tensions eased, marking their first weekly decline in seven weeks.

Russia-Related Trade Shifts and Policy Moves

Alongside Middle East developments, investors tracked efforts to constrain Russia’s oil revenues linked to its war in Ukraine. The European Commission on Friday put forward a broad proposal to prohibit any services that facilitate Russia’s seaborne crude exports.

At the same time, trade patterns continued to evolve in Asia. Refiners in India, previously the largest buyers of Russia’s seaborne crude, are steering clear of purchases for April delivery and are expected by refining and trade sources to avoid such spot trades for a longer period. Those sources said this stance could support New Delhi’s efforts to secure a trade agreement with Washington.

“Oil markets will remain sensitive to how broadly this pivot away from Russian crude unfolds, whether India’s reduced purchases persist beyond April, and how quickly alternative flows can be brought online,” Sachdeva said.