Oil prices fell after Iran announced it had received some indication that the United States was prepared to end the embargo, paving the way for talks between the two countries.
Brent crude fell 2% to around $97 a barrel after rising about 9% in the previous two sessions, while West Texas Intermediate crude was near $88.
Iran's ambassador to the United Nations, Amir Saeed Irvani, told reporters, I expect the next round of talks to take place as soon as the sanctions are lifted. They will find us ready if they want to sit at the negotiating table, discuss, and reach a political settlement, according to the semi-official Iranian news agency Tasnim.
President Donald Trump on Tuesday extended the ceasefire with Iran, even as stalled peace talks and the blockade of the Strait of Hormuz continued to disrupt shipping. Trump said the United States would refrain from launching new attacks on Iran but would maintain the blockade on Iranian-linked vessels until the discussions were resolved.
The US president later said in a post on Truth Social that if the United States lifts its blockade to open the Strait of Hormuz, there will never be an agreement with Iran, unless we blow up the rest of their country, including their leaders!
Sharp fluctuations due to developments in the war
Oil prices were severely affected by developments in the Arabian Gulf and the near-complete halt of shipping through the Strait of Hormuz, a vital waterway that typically carries about a fifth of the world's oil flows. Volatility soared to its highest level since 2020, when the coronavirus pandemic slashed demand.
Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said news is coming in very quickly, but oil prices remain stagnant. She added that the volatility surrounding a potential ceasefire extension, the blockade, and Iran's role is keeping markets on edge, but the reality is that flows remain constrained.
Tasnim news agency, citing sources, reported that Iran will not reopen the Strait of Hormuz as long as the US Navy continues to intercept ships, and will break the blockade by force if necessary.
The United States said on Tuesday that it had stopped and boarded a sanctioned oil tanker, after seizing a cargo ship over the weekend, and that it had redirected a total of 28 vessels.
Brent crude, the global benchmark, briefly rose above $100 a barrel in after-settlement trading on Tuesday, after the Associated Press reported that U.S. Vice President J.D. Vance had canceled a trip to Islamabad for peace talks.
This came after Iranian media reported that the country had informed the United States, via Pakistan, that it would not attend the talks. Futures then declined following Trump's comments regarding extending the ceasefire.
Stalled negotiations and ongoing pressure
The negotiations were seen as a last chance to de-escalate tensions before the two-week truce expired, and to clarify whether oil tankers would soon be able to pass through the strait. The two sides face a number of outstanding issues, including Iran's nuclear capabilities and Israel's invasion of Lebanon.
U.S. Treasury Secretary Scott Bisent said in a post on X that the department will continue to apply maximum pressure to weaken Tehran’s ability to generate, transfer, and return funds.
He added: The oil storage facilities on Kharg Island will be full, and Iran's fragile oil wells will be shut down, referring to the main site for exporting Iranian crude.
Iran exports most of its oil to small, independent refineries in China, which have less exposure to international financial markets. Beijing has opposed unilateral sanctions.
Trump made vague comments Tuesday about the possibility of China supplying Iran with weapons or other potentially lethal war supplies, a move that would test the U.S. red line on aiding Tehran during wartime, according to an interview he gave to CNBC.
Vandana Hari, founder of the analysis firm Vanda Insights, said that what matters to the oil market, and increasingly to the global economy, is the status of the Strait of Hormuz. She added: “With no conceivable way to reopen it without a peace agreement, we are stuck in an environment of high oil prices and inflation.”
In the latest trading, Brent crude futures for June delivery fell 1.3% to $98.17 a barrel by 1:38 p.m. Singapore time. West Texas Intermediate crude futures for June delivery also declined 1.7% to $88.15 a barrel.
