BY COMFORT OGBONNA
Oil prices fell by about 1% on Monday as investors weighed the prospect of renewed diplomatic engagement between the United States and Iran against fresh trade uncertainty sparked by President Donald Trump’s latest tariff move.
The easing of immediate geopolitical fears helped temper last week’s rally, while concerns about global economic growth and fuel demand added downward pressure.
Brent crude futures declined 76 cents, or 1.06%, to $71 per barrel in early trading. U.S. West Texas Intermediate crude slipped 75 cents, or 1.10%, to $65.75 a barrel. The retreat followed gains of more than 5% last week, when mounting tensions between Washington and Tehran had lifted prices amid fears of potential supply disruptions.
The latest shift in sentiment came as the U.S. and Iran prepared for a third round of nuclear negotiations scheduled for Thursday in Geneva. Oman’s foreign minister said both sides would return to the table in an effort to narrow differences over Iran’s nuclear programme.
Tehran has signaled a willingness to consider concessions in exchange for sanctions relief and formal recognition of its right to enrich uranium, according to a senior Iranian official.
The possibility of diplomatic progress has reduced immediate fears of military confrontation in the Middle East, a region that remains central to global oil supply. However, analysts caution that risks have not disappeared.
Vandana Hari, founder of Vanda Insights, said Brent crude currently carries an estimated $10 per barrel geopolitical risk premium linked to Iran. She noted that as long as the threat of potential U.S. strikes lingers and Washington maintains a significant naval presence in the region, it will be difficult for crude prices to fall sharply.
At the same time, fresh trade tensions have complicated the demand outlook. President Donald Trump announced over the weekend that he would raise a temporary tariff on U.S. imports from 10% to 15%, the maximum level permitted under the law, after the Supreme Court of the United States struck down his previous sweeping tariff programme. The move reintroduced uncertainty into global markets, particularly as investors assess the potential impact on trade flows and economic activity.
Tony Sycamore, an analyst at IG Markets, said the tariff news triggered risk-averse behavior across financial markets. He pointed to rising gold prices and weaker U.S. equity futures as evidence of caution among investors. Such sentiment tends to weigh on crude oil, as traders anticipate slower economic growth and softer fuel consumption if trade frictions intensify.
China responded cautiously to the Supreme Court’s decision, saying it is conducting a “full assessment” of the ruling and urging Washington to remove what it described as unilateral tariff measures affecting trading partners. Beijing’s comments highlighted the broader implications of U.S. trade policy for global commerce and energy demand.
Looking ahead, major financial institutions are offering mixed signals about the oil market’s direction. Analysts at Goldman Sachs said they expect the global oil market to remain in surplus in 2026, assuming there is no significant disruption to Iranian supply. The bank raised its fourth-quarter 2026 price forecasts for Brent and WTI by $6, to $60 and $56 per barrel respectively, citing lower inventories among OECD countries.
However, Goldman Sachs also warned of potential downside risks. If sanctions relief were granted to Iran — and possibly to Russia — additional barrels could enter the market more quickly than anticipated. That scenario could accelerate stock builds and place further pressure on prices, trimming between $5 and $8 from the bank’s fourth-quarter 2026 projections.
For now, oil markets remain caught between competing forces: easing geopolitical tensions that reduce supply risk, and trade-related uncertainty that clouds the outlook for global growth and energy demand. Traders are likely to remain sensitive to headlines from Geneva’s nuclear talks, developments in U.S. trade policy, and signals about the broader health of the world economy as they navigate the weeks ahead.
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