Oil prices were broadly steady on Tuesday as market participants assessed the risk of supply interruptions after Iran launched naval drills near the Strait of Hormuz just ahead of scheduled nuclear talks with the United States later in the day.
U.S. President Donald Trump said on Monday that he would be involved "indirectly" in the talks in Geneva, and added that he believes Tehran wants to make a deal. Over the weekend, Trump said that regime change in Iran "would be the best thing that could happen." These comments arrived as traders tried to gauge whether diplomatic engagement or continued tensions will shape near-term crude flows and risk premia.
Price moves and market context
By 0106 GMT, Brent crude futures were down 0.2% at $68.59 a barrel, following a 1.3% rise on Monday. U.S. West Texas Intermediate (WTI) crude was quoted at $63.73 a barrel, a gain of 84 cents, or 1.34%. The WTI move incorporated price action from Monday because that contract did not have a settlement on that day due to the U.S. Presidents Day holiday.
Liquidity in parts of Asia was thin on Tuesday as many markets remained closed for Lunar New Year observances. Mainland China, Hong Kong, Taiwan, South Korea and Singapore were among the markets observing holidays, reducing regional trading activity and potentially amplifying price sensitivity to news flows.
Geopolitical and analyst commentary
Analysts noted the market was on edge amid ongoing geopolitical uncertainty. Daniel Hynes, an analyst at ANZ, wrote in a research note that "the market remains unsettled amid ongoing geopolitical uncertainties." Hynes said the risk premium embedded in oil prices could unwind quickly if tensions in the Middle East ease or if there is meaningful progress in the Ukraine situation, while any negative outcome or further escalation could be bullish for oil.
Iran began a military drill on Monday in the Strait of Hormuz, a key international waterway and an export route for crude from Gulf Arab states. These Gulf producers have been calling for diplomatic measures to resolve the dispute, mindful that Iran and fellow OPEC members Saudi Arabia, the United Arab Emirates, Kuwait and Iraq send the bulk of their crude shipments through the strait, largely destined for Asian buyers.
Supply-side considerations and OPEC+ signals
Market watchers also noted comments from Citi suggesting that if disruptions to Russian supply keep Brent in a $65 to $70 per barrel range in coming months, OPEC+ is likely to respond by tapping spare capacity to raise output. Separately, three OPEC+ sources indicated the group is leaning toward resuming oil output increases from April as it prepares for peak summer demand, with price strength supported by tensions related to U.S.-Iran relations.
Citi added that its base case expects both Iran and Russia-Ukraine deals to be reached by or during the summer, which would contribute to a decline in prices to about $60-62 per barrel for Brent.
Summary
Oil held near Monday's gains as traders balanced the prospect of diplomacy against the immediate impact of Iranian naval drills near a major export route. Price action was mixed between Brent and WTI, with thinner Asian liquidity due to Lunar New Year holidays and commentary from analysts and banks pointing to possible OPEC+ responses depending on evolving supply risks.