Market snapshot
Oil advanced in Asian trading on Tuesday, extending a recovery that saw both global benchmarks approach seven-month peaks in the prior session. As of 22:22 ET (03:22 GMT), Brent oil futures were up 0.8% at $72.04 per barrel, while West Texas Intermediate (WTI) crude futures rose 0.8% to $66.81 per barrel. Both contracts had touched near seven-month highs in the previous session but ended that day slightly lower.
Political developments in focus
Traders remained cautious ahead of a third round of nuclear negotiations between Washington and Tehran scheduled for Thursday in Geneva. The talks are being watched closely because market participants view their outcome as a key determinant of the geopolitical risk premium currently embedded in oil prices.
Tensions have been elevated since last week amid signs that the situation could escalate. The U.S. withdrew some non-essential embassy personnel from Beirut, a move market observers noted as reflecting concern about diplomatic efforts failing and the potential for heightened conflict. In a social media post on Monday, President Donald Trump said it would be a "very bad day" for Iran if it does not make a deal.
Analysts at ING commented on the implications of a deal, writing: "In the case of a deal, we would see a fairly aggressive erosion of the risk premium currently priced into the market - although reaching a deal is easier said than done." The note underlined how a successful negotiation could reduce the geopolitical component supporting prices, while a breakdown could lift fears of tighter sanctions enforcement or disruptions to crude flows.
Market participants point to the Strait of Hormuz as a key vulnerability given its role as an important conduit for global crude shipments. Concerns about a possible military confrontation contributed to a roughly 6% rise in oil prices last week, according to market references.
Tariff developments temper demand prospects
Oil's recent gains have been moderated by broader macroeconomic uncertainty tied to trade policy. The U.S. Supreme Court struck down an earlier tranche of tariffs that had been imposed under emergency powers. In response, President Trump has moved to reimpose duties of up to 15% under alternative statutes and warned that countries that "play games" with U.S. trade deals could face higher tariffs.
The prospect of renewed trade frictions has clouded the outlook for global economic growth and fuel demand, tempering the oil rally even as geopolitical risks underpin prices. This mix of factors has left markets balancing the possibility of reduced risk premia if diplomacy succeeds against the demand-dampening effects of escalating tariff measures.
Summary note: Markets are currently navigating two dominant threads - geopolitical risk tied to U.S.-Iran negotiations and trade-policy uncertainty stemming from U.S. tariff actions - both of which are influencing oil price direction and market sentiment.