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Sanctions Loom, Oil Slides
Oil prices fell Monday as investors awaited details of what Washington has billed as its toughest-ever sanctions campaign against Iran, with West Texas Intermediate down about 1.62% to $85.65 per barrel and Brent losing 1.38% to $93.09 a barrel.
“West Texas Intermediate futures, the U.S. benchmark, declined about 1.62% to $85.65 per barrel”
U.S. Treasury Secretary Scott Bessent was set to unveil a new package of sanctions against Iran later Monday, after he said in a post on X that "At dawn begins an economic D-Day — the single greatest financial offensive ever marshaled against an adversary."
The announcement followed President Donald Trump’s threat last week to launch the "most crushing economic operation ever taken against any country" against Iran, while Tehran dismissed the threat of intensified economic pressure.
Iran pushed back through the Islamic Revolutionary Guard Corps, which said Tehran has ways "to counter the adverse effects of the enemy's war" and can "easily establish economic relations with countries," according to Iranian state media.
Commonwealth Bank of Australia said it expects oil prices to remain volatile in the second half of the year as markets weigh whether Washington’s push to economically isolate Iran will succeed and how Tehran could respond.
Markets Weigh Hormuz Risk
Brent crude futures declined US$1.23, or 1.3%, to US$93.16 a barrel, while U.S. West Texas Intermediate fell US$1.36, or 1.6%, to US$85.70 a barrel as investors locked in profits ahead of the expected U.S. announcement.
The decline came as both benchmarks recorded gains of more than 5% last week amid concerns over disruptions to oil shipments through the Strait of Hormuz following a stalemate in U.S.-Iran peace talks.
Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, said it remains unclear whether U.S. efforts to economically isolate Iran will achieve their intended objective, warning that if the sanctions prove effective, the risk of a stronger response from Tehran could become an increasing concern for global energy markets.
Iran has criticised Washington’s plans to impose new sanctions, although Iranian President Masoud Pezeshkian has continued to call for a diplomatic solution to the dispute.
Tony Sycamore of IG said divisions within the Iranian leadership could influence the direction of the crisis, while trade sources reported offers of Iranian crude to Chinese buyers had declined as restrictions on shipments tightened.
Tanker Access and Forecasts
Beyond the immediate price moves, the sources tied the sanctions outlook to Strait of Hormuz traffic, where Iran authorised a number of Iraqi oil tankers to transit after repeated requests from Baghdad, according to Iranian state news agency IRNA.
“a key transit point for about a fifth of global supply”
The Reuters report embedded in IndexBox said the Strait of Hormuz is a key transit point for about a fifth of global supply, and that peace talks between the U.S. and Iran hit a stalemate, capping oil shipments through the waterway.
U.S. Treasury Secretary Scott Bessent threatened to impose "the toughest sanctions in history" on Iran, while President Donald Trump threatened sanctions on Iran’s trading partners.
Iran has condemned the planned U.S. sanctions even as Masoud Pezeshkian called for a diplomatic solution, and the IG markets analyst Tony Sycamore said "I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."
Morgan Stanley analysts said crude supply is tightening, citing sharp declines in oil-on-water and onshore inventories, including in China, and said exports from the Middle East have fallen back towards levels recorded in March and April.