Oil prices slipped on Tuesday. This reversed gains from the previous session after reports surfaced that the US and Iran have agreed to hold asecond round of talksin Islamabad. This raised hopes of easing tensions and more oil supply.
Brent crude futures declined 95 cents, or 1%, to $94.53 as of 0003 GMT. U.S. West Texas Intermediate (WTI) crude for May fell $1.54, or 1.72%, to $88.07. The more active June contract was also down $1.09, or 1.3%, at $86.37.
The decline comes after a volatile Monday, when both benchmarks surged, Brent jumping 5.6% and WTI climbing 6.9%, after Iran shut the Strait of Hormuz and the US seized an Iranian cargo ship, escalating fears of supply disruptions.
However, sentiment shifted as diplomatic momentum appeared to build. According to an Axios report citing three sources, Iran’s Supreme LeaderMojtaba Khameneihas now given the green signal for the country’s negotiating team to participate in talks, expected to take place in Islamabad. The report also said US Vice President JD Vance is likely to travel for the discussions, indicating both sides are preparing to re-engage.
This marks a significant shift after Iran’s Foreign Ministry had earlier indicated that no talks with Washington were planned this week. A senior Iranian official also told Reuters that Tehran is weighing participation following Pakistan’s efforts to mediate and end the US blockade.
Markets are now betting that the renewed engagement could lead to an extension of the current two-week ceasefire or even a broader agreement, potentially easing constraints on oil flows.
“We continue to lean toward an MOU being signed and/or the ceasefire being extended this week, potentially evolving into a broader agreement,” analysts at Citi said in a note. “That said, we remain prepared to pivot toward a more protracted disruption scenario should negotiations falter this week.”
Despite the optimism, uncertainty remains high. The same Iranian official stressed that no final decision has been made, while Foreign Minister Abbas Araqchi said “continued violations of the ceasefire” by the US remain a hurdle to further negotiations. Separately, Iran’s top negotiator and parliament speaker Mohammad Baqer Qalibaf reiterated that Tehran would not negotiate under threats.
Meanwhile, disruptions continue to ripple through global energy markets. Shipping activity in the Strait of Hormuz - through which about one-fifth of the world’s oil supply passes - remained limited on Monday. Kuwait has declared force majeure on oil shipments due to the blockade, Bloomberg News reported.
Analysts warn that prolonged disruption could have severe consequences. Citi estimates that if the Strait remains blocked for another month, total supply losses could reach 1.3 billion barrels, potentially pushing prices toward $110 per barrel in the second quarter of 2026.
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