- Oil prices fell due to potential US-Iran diplomatic talks.
- Conflicting signals keep markets cautious about Strait.
- Fragile ceasefire, China demand, shipping traffic also watched.
Oil prices edged lower on Tuesday as investors assessed the possibility of fresh diplomatic engagement between the United States and Iran, while remaining cautious over the fragile ceasefire that has eased tensions in the four-month conflict. Market participants also continued to monitor developments around the Strait of Hormuz, a key route for global energy supplies.
According to Reuters, hopes of possible talks between Washington and Tehran in Doha have improved market sentiment, although uncertainty surrounding the negotiations and shipping through the Strait of Hormuz continues to keep traders on edge.
Brent crude futures for August, which expire on Tuesday, fell 0.9%, or 64 cents, to $72.51 a barrel as of 0356 GMT. The contract is on track for a monthly decline of around $20, or 22%, from last month’s close. The more actively traded September Brent contract slipped 0.4%, or 31 cents, to $73.60 a barrel.
US West Texas Intermediate crude for August declined 0.6%, or 39 cents, to $70.36 a barrel and is poised for a monthly fall of roughly $17, or 19%, compared with its May 29 closing price. Both benchmarks have nearly returned to the levels seen before the conflict began on February 27.
Investors Await Clarity On Doha Talks
Market sentiment has been supported by expectations that diplomatic engagement could help reduce geopolitical tensions, even though there has been little visible evidence of a full return to normal shipping through the Strait of Hormuz.
“Investors are pricing in hopes of a positive outcome from the Doha talks, even though real normalisation of flows through the Strait of Hormuz is not yet visible,” said Tim Waterer, chief market analyst at KCM Trade.
Waterer added that investors remain cautiously optimistic but are still protecting against downside risks until clearer signs of de-escalation emerge.
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Mixed Signals From Iran And The United States
Iranian Deputy Foreign Minister Kazem Gharibabadi said on Monday that Iranian and Omani experts would soon begin discussions on redefining transit routes through the Strait of Hormuz. He also said Iran would seek to prevent vessels from travelling outside designated shipping lanes.
However, Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said there would be no negotiation meetings with the United States at any level in the coming days, casting doubt over expectations of imminent diplomacy.
US President Donald Trump also offered an uncertain assessment of the situation.
“The meeting in Doha is going to be perhaps important, perhaps not. We’re going to find out,” Trump told reporters in the Oval Office.
Fragile Ceasefire Keeps Markets On Alert
Conflicting messages from both sides have reinforced concerns over the durability of the June 17 agreement that paused hostilities. The ceasefire followed months of fighting that disrupted oil shipments through the Strait of Hormuz and created uncertainty in global energy markets.
The continuing uncertainty also presents a political challenge for Trump ahead of November’s congressional elections, with energy prices remaining closely watched by consumers and policymakers alike.
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China Demand And Shipping Activity In Focus
Apart from geopolitical developments, traders are also watching signs of demand from China, the world’s largest crude importer.
“We wait for more evidence of a rise in Chinese buying but cannot yet bet on a big return to the market from the world’s largest crude importer,” said Neil Crosby, head of research at Sparta Commodities.
Meanwhile, shipping data showed that Middle Eastern producers have continued loading oil and liquefied natural gas despite recent ship attacks in the Strait of Hormuz and renewed strikes involving the United States and Iran. Vessel traffic through the strategic waterway reached its highest level last week since the conflict began at the end of February.
