Brent Oil Slips in Asian Trade as Iran Drills Near Strait of Hormuz Ahead of U.S. Nuclear Talks

BY COMFORT OGBONNA

Brent crude prices edged lower during Asian trading on Tuesday as investors weighed the risk of potential supply disruptions after Iran launched naval exercises near the Strait of Hormuz, just hours before scheduled nuclear discussions with the United States. The geopolitical backdrop added uncertainty to energy markets already navigating tight supply dynamics and shifting diplomatic signals.

Brent crude futures fell 0.47%, or 32 cents, to $68.33 per barrel by 0430 GMT, retreating slightly after posting a 1.33% gain in the previous session. Meanwhile, U.S. West Texas Intermediate (WTI) crude traded at $63.51 per barrel, up 62 cents, or 0.99%. The movement in WTI largely reflected Monday’s price action, as the contract did not settle that day due to the U.S. Presidents Day holiday.

Trading volumes were thinner than usual across parts of Asia, with several major markets closed for Lunar New Year celebrations, including mainland China, Hong Kong, Taiwan, South Korea, and Singapore. The limited participation contributed to subdued price movements despite heightened geopolitical tensions.

The focus of the market has turned to diplomatic developments between Washington and Tehran. U.S. President Donald Trump said he would be involved “indirectly” in the nuclear talks taking place in Geneva and expressed confidence that Iran is seeking an agreement. Over the weekend, he also remarked that regime change in Iran “would be the best thing that could happen,” a comment that added to the already delicate atmosphere surrounding negotiations.

Analysts say oil prices are likely to remain sensitive to headlines from the talks. Sugandha Sachdeva, founder of SS WealthStreet, noted that market sentiment is closely linked to both the tone and progress of the discussions, maintaining a geopolitical risk premium in crude prices. She added that traders should expect continued volatility, with sharp swings driven more by diplomatic signals than by traditional supply-and-demand fundamentals.

Iran’s military drill in the Strait of Hormuz, which began on Monday, has amplified those concerns. The waterway is one of the world’s most critical oil transit chokepoints, handling a significant portion of global crude exports. Iran, along with fellow OPEC members Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq, ships most of its oil through the strait, much of it destined for Asian markets. Any disruption in this corridor could have swift and far-reaching implications for global energy supply.

At the same time, broader supply considerations are influencing expectations for the months ahead. Analysts at Citi indicated that if disruptions to Russian oil supply keep Brent trading within the $65 to $70 per barrel range, OPEC+ could respond by increasing output from its spare production capacity. Three sources within OPEC+ have suggested the group is leaning toward resuming gradual output increases from April, aiming to prepare for peak summer demand while prices are supported by U.S.-Iran tensions.

Citi also projected that potential diplomatic resolutions involving both Iran and the Russia-Ukraine conflict could materialize by or during the summer, potentially contributing to a decline in Brent prices toward the $60 to $62 per barrel range. Such outcomes would likely ease some of the geopolitical risk currently embedded in crude markets.

For now, oil traders remain on edge, balancing immediate geopolitical developments against longer-term supply adjustments. With negotiations underway and military activity continuing in a vital shipping lane, energy markets are poised for further fluctuations in the days and weeks ahead.