BY COMFORT OGBONNA
Oil prices edged lower on Tuesday, pulling back from the previous session’s strong gains as traders remained cautious about the uncertain trajectory of U.S.-Iran peace negotiations and the broader geopolitical risk premium embedded in global energy markets.
Brent crude futures fell 75 cents, or 0.79%, to $94.23 per barrel at 0434 GMT, while U.S. West Texas Intermediate dropped 85 cents, or 0.92%, to $91.31 per barrel. The decline came just one day after both benchmarks surged more than 5%, underscoring the volatility driven by shifting headlines around the Middle East conflict.
Despite Tuesday’s retreat, oil prices remain sensitive to rapid swings in sentiment tied to diplomatic developments. The market had previously posted a monthly loss of more than 16% in May, reflecting earlier optimism that a peace agreement could ease tensions and stabilize global supply routes.
Investor attention continues to center on negotiations between Washington and Tehran, which have produced conflicting signals in recent days. U.S. President Donald Trump said talks with Iran were ongoing, although he also remarked in a separate interview that he would not be concerned if negotiations ended. Shortly afterward, he posted on social media that discussions were continuing and suggested that a deal to extend a ceasefire and reopen the Strait of Hormuz could be reached within a week.
The mixed messaging has left energy traders struggling to assess whether diplomatic progress is genuinely being made or whether negotiations are stalling once again. Market participants say clarity on this issue will be crucial in determining whether oil’s risk premium remains elevated or begins to unwind.
Analysts note that geopolitical developments remain the dominant force shaping oil prices in the short term. According to market strategists, traders are closely watching official statements from both the United States and Iran, as well as developments on the ground that could signal either escalation or de-escalation of tensions.
Particular attention is being paid to the Strait of Hormuz, one of the world’s most critical energy transit routes. Iranian actions during the ongoing conflict have already disrupted shipping flows through the Gulf, restricting a significant share of global oil and liquefied natural gas transport. At one point, nearly a fifth of global energy flows were affected, contributing to a sharp increase in oil prices.
Analysts say the situation in the waterway remains a key indicator for markets, with tanker movements and shipping data providing real-time signals of whether conditions are stabilizing or deteriorating. Any formal agreement between the United States and Iran would likely need to include clear guarantees for safe passage through the strait in order to restore normal energy trade flows.
The broader geopolitical backdrop also includes a partial ceasefire between Hezbollah and Israel, announced by Lebanon earlier in the week. The agreement represents a limited de-escalation in a wider regional conflict that has added to uncertainty in global energy markets and amplified concerns about supply disruptions.
Meanwhile, shifting supply dynamics are also influencing market sentiment. U.S. crude exports rose to a record 5.6 million barrels per day in May, as overseas refiners in Asia and Europe turned increasingly to American supply amid instability in the Middle East. The surge highlights how global buyers have adjusted procurement strategies in response to disruptions in traditional supply routes.
At the same time, preliminary data suggests that U.S. crude inventories may have fallen by approximately 3.6 million barrels in the week ending May 29, extending a recent trend of stock draws. Analysts also expect declines in gasoline and distillate inventories, indicating continued strength in demand despite volatility in global markets.
Shipping industry participants, meeting in Athens, emphasized that any potential peace agreement between Washington and Tehran would need to establish transparent and enforceable rules for maritime traffic through the Strait of Hormuz. Without such clarity, they warned, uncertainty could continue to weigh on global energy logistics and pricing stability.
As traders assess the balance between diplomatic progress and ongoing geopolitical risks, oil markets are expected to remain highly reactive to news flow. For now, prices continue to fluctuate within a narrow but volatile range, reflecting a market caught between hopes for de-escalation and fears of renewed disruption in one of the world’s most important energy corridors.
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