Oil prices fell to their lowest levels in around a week on Tuesday as investors concluded that Washington’s latest economic measures against Iran posed less of an immediate threat to global crude supplies than a renewed military escalation.
Brent crude futures declined 35 cents, or 0.38%, to $91.82 a barrel by 0810 GMT, while U.S. West Texas Intermediate crude dropped 41 cents, or 0.48%, to $84.60.
The decline took Brent to its weakest level since August 19, while WTI touched its lowest point since August 17.
Ole Hansen, head of commodity strategy at Saxo Bank, said the increased emphasis on economic pressure rather than military action in the U.S.-Israeli conflict with Iran had reduced some of the anxiety surrounding oil supplies. The U.S. sanctions announcement was also less aggressive than markets had anticipated.
Iran has threatened retaliation after the Trump administration outlined an expanded sanctions campaign intended to restrict Tehran’s economic lifelines. Iranian officials have expressed confidence that the country’s major trading partners will resist pressure from Washington.
The U.S. has warned other countries to reduce commercial dealings with Iran or risk secondary sanctions. However, the Treasury Department did not immediately impose penalties as part of the announcement.
Treasury Secretary Scott Bessent also declined to identify which countries could ultimately face measures or when penalties might be introduced, indicating instead that governments would be given time to comply with Washington’s demands.
Shift Towards Economic Pressure Calms Oil Markets
Although U.S. Defense Secretary Pete Hegseth said on Monday that Washington was not ruling out military force against Iran, the greater focus on economic coercion has reduced immediate concerns over further disruption to Middle Eastern oil production and exports.
The change in strategy has encouraged traders to remove some of the geopolitical premium that had accumulated in crude prices during periods of heightened military tension.
Physical supply risks remain significant, however, particularly around the Strait of Hormuz, where shipping activity has been heavily disrupted by the conflict.
Hormuz Shipping Disruption Keeps Risk Premium in Place
“Iran still retains the ability to respond by disrupting shipping, which continues to keep a residual premium in the oil price,” said Tim Waterer, chief market analyst at KCM.
Maritime risks were highlighted again on Tuesday after an oil tanker was struck by an unidentified projectile and disabled roughly nine nautical miles, or 16.7 kilometres, northeast of Ash Shishah in Oman, according to the United Kingdom Maritime Trade Operations.
Traffic through the Strait of Hormuz also remained exceptionally low. Shipping data showed that just two tankers passed through the waterway on Monday, representing the lowest daily number of commodity vessels since early May. Both tankers were travelling into the Gulf.
The strait has become a central concern for energy markets since the U.S.-Israeli conflict with Iran began on February 28. Before the war, approximately one-fifth of global oil consumption typically passed through the strategically important route.
Disruption to those flows has forced some countries to draw down commercial and strategic petroleum inventories to compensate for reduced supplies.
Russian Refinery Operations Suspended After Drone Strike
Another potential supply issue emerged in Russia, where the Novoshakhtinsk refinery in the southern Rostov region was damaged by a Ukrainian drone overnight.
The regional governor said operations at the facility were suspended following the attack.
Despite continuing risks to physical supplies in both the Middle East and Russia, Tuesday’s price action indicates that traders currently view Washington’s economic campaign against Iran as less threatening to global crude flows than a further escalation of military activity.
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