Oil markets retreated slightly on Tuesday as traders weighed the risk of supply disruption connected to heightened U.S.-Iran tensions and fresh guidance for commercial shipping. By 01:02 GMT, Brent crude futures were down 25 cents, or 0.4%, at $68.79 a barrel, while U.S. West Texas Intermediate fell 23 cents, or 0.4%, to $64.13.
The move lower followed a gain of more than 1% on Monday, when the U.S. Department of Transportation's Maritime Administration issued guidance asking U.S.-flagged commercial vessels to keep as far away as practicable from Iran's territorial waters and to verbally refuse permission to board if Iranian forces sought to do so. That advisory kept focus on the Strait of Hormuz, a narrow chokepoint between Oman and Iran through which roughly one-fifth of the world’s oil consumption passes.
Many of the region's largest crude exporters - Iran, Saudi Arabia, the United Arab Emirates, Kuwait and Iraq - send the bulk of their oil exports through the strait, primarily to Asian buyers. Because of the volume moving through that waterway, any escalation affecting transit there is widely viewed as a meaningful threat to global oil supplies.
Diplomatic activity has continued alongside the maritime guidance. Iran's top diplomat said last week that Oman-mediated nuclear talks with the United States were off to a "good start" and were set to continue, a development that did not, in the view of some market participants, eliminate the residual risk premium tied to potential escalation.
"While talks in Oman produced a cautiously positive tone, lingering uncertainty over potential escalation, sanctions tightening, or supply disruptions in the Strait of Hormuz has kept a modest risk premium intact," Tony Sycamore, an analyst at IG, wrote in a client note.
At the same time, policymakers in Europe are considering further restrictions on Russian oil. A proposal document reviewed by reporters outlined an EU move to extend sanctions so they would include ports in Georgia and Indonesia that handle Russian oil shipments - the first time the bloc would target ports in third countries. The measure is described as part of broader efforts to tighten sanctions on Russian oil, a significant source of revenue for Moscow, over the war in Ukraine.
Market flows are also adjusting. Traders said Indian Oil Corp purchased six million barrels of crude from West Africa and the Middle East, in a buying pattern consistent with New Delhi steering clear of Russian oil as part of a push for a trade deal with Washington.
The combination of shipping advisories, diplomatic signals, sanction proposals and large commercial purchases contributed to a complex market backdrop that left prices marginally lower early in the trading day.