By COMFORT OGBONNA
Oil prices fell by more than $1 a barrel on Monday as investors took profits following two consecutive weeks of gains and prepared for an expected announcement from Washington on additional sanctions against Iran.
Brent crude futures declined $1.23, or 1.3%, to $93.16 a barrel by 3:29 a.m. GMT. U.S. West Texas Intermediate crude fell $1.36, or 1.6%, to $85.70 a barrel.
Despite Monday’s decline, both major benchmarks remained sharply higher over the past two weeks. Oil prices gained more than 5% last week as stalled diplomatic efforts between the United States and Iran increased concerns about the security of energy supplies from the Middle East.
The Strait of Hormuz remains at the center of those concerns. The strategic waterway is a major route for global oil shipments, with roughly one-fifth of the world’s petroleum supply traditionally passing through the strait.
With tensions between Washington and Tehran showing little sign of easing, traders have been closely watching the possibility of additional U.S. sanctions and their potential impact on Iranian oil exports.
U.S. Treasury Secretary Scott Bessent was scheduled to address the issue Monday afternoon, with Washington expected to announce additional measures targeting Iran. President Donald Trump has also threatened sanctions against countries and companies that continue doing business with Tehran.
The prospect of tighter restrictions has created a complicated outlook for the oil market. On one hand, stronger sanctions could further reduce Iranian crude exports and tighten global supplies. On the other, investors are concerned that escalating economic pressure could provoke a stronger response from Iran and increase the risk of further disruption across the region.
“It is unclear whether U.S. policy to economically isolate Iran will prove effective,” Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, wrote in a note.
He said that if the measures succeed in reducing Iran’s ability to sell oil and access international markets, the possibility of Tehran responding with increased confrontation could become a greater concern for energy markets.
Iran has rejected Washington’s plans for additional sanctions, while President Masoud Pezeshkian has continued to call for a diplomatic solution to the dispute.
The conflicting positions have deepened uncertainty over whether the confrontation will move toward negotiations or further escalation.
Analysts say there are also divisions within Iran’s leadership over how the country should respond to mounting pressure from the United States.
“The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end,” said IG Markets analyst Tony Sycamore.
He added that developments over the course of the week could provide a clearer indication of which faction has greater influence over Iran’s response.
The uncertainty is already affecting physical oil markets. Offers of Iranian crude to buyers in China have declined as restrictions on Tehran’s exports have disrupted shipments, according to people familiar with the trade.
The reduction in Iranian supplies has contributed to higher prices for some available cargoes, increasing pressure on buyers seeking alternative sources.
At the same time, some movement through the Strait of Hormuz has continued. Iran has allowed a number of Iraqi oil tankers to pass through the waterway following repeated requests from Baghdad, a move that could help maintain some regional trade flows despite the broader tensions.
However, energy analysts remain concerned that any sustained disruption could take longer than previously expected to resolve.
The decline in available oil supplies has become increasingly visible in both seaborne shipments and inventories. Analysts at Morgan Stanley said crude supplies were tightening, with oil held on tankers declining sharply in recent weeks while onshore inventories have also fallen, including in China.
“Crude supply is tightening,” the analysts said, noting that several sources indicate Middle Eastern exports have fallen back toward levels seen earlier in the year.
The tightening supply picture has forced some analysts to scale back expectations for a rapid recovery in Middle Eastern oil exports.
The market is now balancing two competing forces: weaker prices caused by profit-taking and concerns about demand on one side, and the possibility of a deeper supply disruption caused by sanctions and geopolitical tensions on the other.
If Washington imposes tougher sanctions and successfully restricts Iranian oil exports, the global market could face additional supply losses. A further escalation involving shipping routes in the Persian Gulf could create even greater risks for crude prices and energy security.
For now, traders remain focused on developments between Washington and Tehran, particularly any announcement on new sanctions and Iran’s response.
The direction of oil prices in the coming days is likely to depend heavily on whether diplomatic efforts resume, sanctions significantly reduce Iranian exports or tensions escalate further across the Middle East.
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