Oil benchmarks eased more than 1% in Asian trading on Monday, pausing the sharp advance seen last week as investors assessed two competing forces: a potential diplomatic thaw between the United States and Iran, and fresh uncertainty tied to US trade policy.
Market moves
As of 20:50 ET (01:50 GMT), April Brent futures were down 1% at $71.03 per barrel, while West Texas Intermediate (WTI) for April delivery slipped 0.9% to $65.75 per barrel. Both contracts had rallied nearly 6% in the prior week, a gain supported by market concerns about a possible US-Iran confrontation and by an unexpected decline in US crude inventories.
Diplomatic developments in focus
Traders turned their attention to a third round of nuclear talks scheduled for Thursday in Geneva between Iran and the United States, viewing the meeting as a potential path to de-escalation. Iranian Foreign Minister Abbas Araghchi told CBS's "Face the Nation" that there was a good chance of reaching a diplomatic solution and that such a solution was within reach. Markets interpreted the comment as indicating a willingness by Iranian officials to seek compromise.
Iran plays a significant role in global oil supply as a member of the Organization of the Petroleum Exporting Countries and as a holder of some of the world’s largest proven crude reserves. The country’s geographic position along the Strait of Hormuz is also critical: roughly one-fifth of global seaborne oil passes through that chokepoint. Market participants note that any escalation involving Iran could disrupt oil flows and push up freight and insurance costs.
Trade policy adds fresh downward pressure
Compounding geopolitical factors, the US administration announced new global tariffs on imports after the US Supreme Court struck down a previous, broader tariff programme. Initially set at 10% for a 150-day period, the levy was raised to 15% on Saturday - the maximum permitted under the statute referenced by the administration. Traders saw the move as adding uncertainty to global trade flows and to the demand outlook for oil.
Higher tariffs are likely to disrupt supply chains and could prompt retaliatory measures by trading partners. The direct consequence for energy markets is the risk of slower trade volumes and weaker industrial output, which typically translate into reduced fuel demand.
Outlook and market sensitivity
At present, market sentiment is sensitive to both the trajectory of the Geneva talks and the evolving stance of US trade policy. A diplomatic breakthrough may relieve some of the premium that has built into crude prices, while sustained trade-policy headwinds could weigh on demand prospects for fuels across transport and industrial sectors.
For now, oil prices remain volatile as participants attempt to reconcile the potential for de-escalation in the Middle East with a newly altered global trade landscape.