Oil Prices Slip as Markets Await US Sanctions on Iran
Oil prices declined on Monday as investors awaited details of a US plan to impose new sanctions on Iran, with Brent crude falling more than 1% to around $93 a barrel and US West Texas Intermediate (WTI) dropping to about $85. The pullback came after both benchmarks posted their second straight weekly gains of over 5%, driven by a stalemate in US-Iran peace talks that has curtailed shipments through the Strait of Hormuz, a waterway that previously carried about a fifth of the world's oil supply.
Bessent's 'Economic D-Day'
US Treasury Secretary Scott Bessent is scheduled to hold a press conference at 2 p.m. EDT Monday to announce what he has described as "the toughest sanctions in history" on Iran. In a post on X, Bessent wrote that the US is entering "the endgame" and called the coming measures "the single greatest financial offensive ever marshaled against an adversary." He has also criticized Iran's "enablers" that purchase and transport its oil, with reports pointing to China as a key target. President Donald Trump has threatened sanctions on countries trading with Iran, calling the effort "Economic Warfare and Isolation on an unprecedented scale."
Iran has dismissed the threats. The Islamic Revolutionary Guard Corps said Tehran has ways to counter the adverse effects of the enemy's war and can easily establish economic relations with countries, according to Iranian state media. Iran's National Security Council secretary Mohsen Rezaei warned that if economic war continues, Tehran will halt all Gulf oil exports, and that participation in the US campaign would be "an act of war." President Masoud Pezeshkian has called for a diplomatic solution.
Market Reactions and Analyst Views
Commonwealth Bank of Australia analyst Vivek Dhar wrote in a note that it is unclear whether US policy to economically isolate Iran will prove effective, but if the measures do work, Iran's ability to respond via increased violence becomes a growing risk for energy markets. IG markets analyst Tony Sycamore noted that the more pragmatic members of the Iranian leadership would prefer to de-escalate, but hardliners would probably prefer to fight to the bitter end.
Trade sources cited by Reuters said offers of Iranian crude to Chinese buyers have declined and prices have jumped due to the US blockade. Iran has allowed several Iraqi oil tankers to pass through the Strait of Hormuz after repeated requests from Baghdad, according to Iran's state news agency IRNA. Morgan Stanley has observed a sharp decline in oil-on-water and noted Middle East exports are back at March/April levels.
Broader Context and Impact
The conflict has pushed oil prices significantly higher since the war began in late February. Brent averaged around $87 a barrel between January and June, well above the roughly $71 recorded in the same period in 2025. Prices spiked above $126 in late April before retreating. Despite Monday's decline, Brent remains nearly 30% higher than pre-war levels, according to The New York Times.
US Energy Secretary Chris Wright posted on X that the US military helped ship over 15 million barrels of oil and products out of the Strait of Hormuz on Tuesday, with the total leaving the region closer to 20 million barrels when pipelines are included. He said the 7-day average of oil leaving the strait is over 8 million barrels a day. Peter McGuire, CEO of Trading.com, told Times Now that if Wright is believed, there is no shortage of energy products, and prices may drop over the coming weeks.
The sanctions announcement is expected to target oil smuggling, currency swaps, front companies, and foreign shipping registries, with secondary pressure on third parties. For India, which imports over 80% of its crude, prolonged disruption could push up energy and shipping costs, affecting corporate margins, inflation, and trade balances. In the domestic market, Indian fuel prices remained unchanged on Monday, with state retailers shielding consumers from volatility. Gold prices rose to a three-month high as investors sought safety amid uncertainty.