BY COMFORT OGBONNA
Oil prices edged lower on Tuesday as investors weighed hopes for a possible resolution to the conflict between the United States and Iran against ongoing concerns over disrupted supply routes and reduced crude flows through key shipping channels.
Brent crude futures declined 50 cents, or 0.57%, to $87.86 a barrel, while U.S. West Texas Intermediate crude fell 37 cents, or 0.45%, to $82.24 a barrel during early trading.
Both benchmarks had dropped nearly 8% in the previous session, reaching their lowest levels since July 20 after the United States unexpectedly paused a series of air strikes against Iran over the weekend. The move increased expectations that diplomatic efforts could reduce tensions and prevent a wider conflict that could threaten global energy supplies.
U.S. President Donald Trump said on Monday that Washington was engaged in productive discussions with Iran and that an agreement remained possible. However, he warned that military action could resume if negotiations failed, while Iranian officials indicated they would respond to further attacks.
“Relief that an off-ramp has been found has taken the heat out of prices and eased concerns around attacks on Saudi infrastructure. However, the situation remains highly fluid,” said IG analyst Tony Sycamore.
Despite the recent decline, oil markets remain supported by concerns over disruptions in major energy routes, particularly the Strait of Hormuz, one of the world’s most important oil transit points.
Officials in Yemen warned that Houthi fighters could attempt to restrict shipping activity near the Bab el-Mandeb Strait, a strategic waterway connecting the Red Sea to the Gulf of Aden. The comments raised concerns that supply risks could spread beyond the immediate U.S.-Iran conflict.
Analysts said it remains uncertain whether Houthi forces have the capability to impose a large-scale blockade, especially given the possibility of military responses from regional powers. However, shipping activity through both the Red Sea and the Strait of Hormuz has already declined significantly.
“The reason prices are not higher at this point is partly due to demand destruction, particularly in Asia,” said Marex analyst Edward Meir, noting that weaker consumption expectations have limited upward pressure on crude prices.
Oil prices also received some downward pressure after the Caspian Pipeline Consortium resumed operations at its Black Sea terminal on Russia’s coast. The facility had temporarily halted oil loading following drone attacks linked to the conflict between Russia and Ukraine.
However, concerns over possible supply disruptions remain elevated after Saudi Arabia reported intercepting drones targeting energy-related locations, including areas near Riyadh. Saudi officials blamed Iran-backed groups operating from Iraq and said they reserved the right to respond.
Separately, Yemen’s Houthi movement said it had targeted Saudi Arabia’s East-West Pipeline, which transports oil to the country’s main Red Sea export terminal at Yanbu. The group said the action was retaliation for Saudi military operations involving drones.
Market analysts noted that crude flows through the Strait of Hormuz remain significantly below normal levels. Recent data showed that combined crude oil and refined fuel exports through the waterway had fallen sharply compared with the previous week, highlighting continued disruption risks.
The decline in shipping activity has kept traders cautious despite the recent fall in prices, with markets closely monitoring diplomatic developments and regional security threats.
Meanwhile, U.S. crude inventories were expected to have declined in the latest week, along with gasoline stocks, while supplies of distillate fuels were likely to increase, according to preliminary industry estimates.
Investors are now watching upcoming inventory data, geopolitical developments, and negotiations between Washington and Tehran for further signals on the direction of global oil prices.
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