Oil Prices Extend Decline as U.S.-Iran Talks Temper Supply Fears

Oil prices extended a steep retreat in Asian trading on Tuesday, compounding a more than 9% overnight sell-off, as signs of diplomatic progress between the United States and Iran calmed fears of a significant disruption to global crude supplies.

As of 20:44 ET (00:44 GMT), Brent crude futures, the international benchmark, slipped 0.6% to $87.85 a barrel. West Texas Intermediate (WTI) crude futures, the U.S. benchmark, fell 0.8% to $81.96 a barrel. The decline marks a sharp reversal from last week when geopolitical tensions briefly pushed Brent above $100 a barrel.

Diplomatic Hopes Drive Sell-Off

The market sentiment shifted after President Donald Trump confirmed that Washington and Tehran were engaged in talks to de-escalate the recent conflict, according to the source material. This was followed by Iran halting retaliatory attacks and reports that China was working to revive diplomatic efforts, prompting traders to unwind the geopolitical risk premium built into prices.

"The more than 9% selloff reflected growing confidence that an off-ramp to the conflict had emerged," said Tony Sycamore, a senior market analyst at IG, in comments cited by the source. However, he cautioned that the pause remains "fragile" and that markets are awaiting "concrete evidence of lasting diplomatic progress" before fully pricing out the risk.

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Supply Chokepoints Remain a Concern

Despite the easing tensions, physical supply disruptions have not fully abated. Sycamore noted that tanker traffic through the critical Strait of Hormuz and the Bab el-Mandeb Strait remains well below normal levels. The Strait of Hormuz is a vital chokepoint that typically handles about a fifth of global oil flows.

Negotiators from Iran and Oman are reportedly continuing discussions to restore safe passage for shipping through the waterway. Elsewhere, supply concerns were partially alleviated after Kazakhstan’s energy ministry announced that its main oil export terminal at the Caspian Pipeline Consortium resumed loadings after recent disruptions, adding to expectations of improved global supply.