Oil prices dropped yesterday and today as the market rapidly stripped out its Iran war premium, Petros Pantzari, Chief Dealer at Monaxa, said in a statement sent to Rigzone on Tuesday.
“The pause in U.S.-Iran attacks, renewed diplomatic signals, and reduced fears of an immediate Strait of Hormuz disruption pushed Brent down toward $86.89 and WTI near $81.16, well below the panic-driven highs,” he added.
“President Trump’s suggestion that a deal remains possible has encouraged traders to price in safer oil flows, while weaker than expected U.S. durable-goods data has added fresh demand concerns,” he continued.
Pantzari warned in the analysis, however, that “this is still a fragile decline, not a fully bearish reset”.
“Any renewed military strikes, shipping restrictions, or disruption to Iranian exports could send the geopolitical premium surging back into crude almost instantly,” he said.
In a market analysis sent to Rigzone today, Samer Hasn, Senior Market Analyst at XS.com, highlighted that oil prices were falling for the third consecutive day, noting that Brent and WTI crude futures were down by more than two percent.
“The continued decline in oil prices comes amid an atmosphere of temporary restraint in the Middle East, following a wave of escalation that lasted nearly two weeks,” he said in the analysis.
“We are currently witnessing an informal, unilateral truce between the United States and Iran,” he added.
In the analysis, Hasn noted that rising oil and gasoline prices and bond yields could encourage President Donald Trump to move toward de-escalation, “temporarily bringing energy prices down and buying more time”.
“We do not know the actual motive, but within hours, Trump had indeed decided to de-escalate, and consequently prices are falling, at least in the futures market,” he pointed out.
Hasn warned, however, that escalation factors remain present.
“Neither party has announced a formal return to negotiations, and there is no indication that either side will make concessions regarding the management of the Strait of Hormuz, let alone other outstanding issues, whether frozen Iranian assets or even the Iranian nuclear program,” he said.
“Without reaching a solid agreement on these issues, escalation could return sooner or later,” he warned.
“As we can see now, escalation is no longer limited to the Strait of Hormuz, as the war’s extended timeframe has expanded targets to include oil extraction and export facilities in the region, and it could cut off routes that served as a somewhat alternative to the Strait of Hormuz,” he went on to state.
In his analysis, Hasn said prolonging the war will deepen damage to vital oil facilities, whether in the Gulf states or in Iran, “which cannot be reversed through negotiations and could require months or even years to repair, keeping crude prices relatively elevated for an extended period”.
He also stated that “extreme and unlikely scenarios could become reality as the war’s timeframe extends”.
“The solution lies in returning to serious negotiations and making concessions by both sides, paving the way for the resumption of crude flows through vital straits and for settling key issues, which could lead to establishing a firm peace in the region,” he added.
“Without this, the rounds of calm we see today will be temporary, followed by greater escalation being prepared by both sides of the war,” he continued.
Carole Nakhle, Chief Executive Officer of Crystol Energy and Secretary General of the Arab Energy Club, told Rigzone on Tuesday that she was not surprised by the recent decline in oil prices.
“The earlier increase was driven more by concerns over potential escalation than by any fundamental change in market balances,” Nakhle highlighted.
“While markets did price in a geopolitical risk premium, it remained relatively measured because supply disruptions never materialized,” Nakhle added.
The Crystol Energy CEO pointed out to Rigzone that she has consistently argued that, as long as both the U.S. and Iran continue to leave the door open to diplomacy, “we are likely to see limited, targeted actions rather than a full-scale escalation”.
“Such actions can serve as a way for both sides to demonstrate resolve during negotiations without abandoning the diplomatic track altogether,” Nakhle said.
“A more sustained impact on oil prices would require a fundamental shift in that dynamic – for example, a complete breakdown of diplomatic efforts or a significant disruption to oil supply or critical infrastructure,” Nakhle noted.
“At present, neither has occurred, so it is unsurprising that some of the geopolitical risk premium has unwound,” Nakhle went on to state.
In a separate market analysis sent to Rigzone on Monday, Sahil Patel, Chief Operating Officer at Empire FX, highlighted that oil prices were falling yesterday “as markets reacted to de-escalating tensions in the Middle East during the weekend”.
“The U.S. suspended its military campaign against Iran late on Friday after nearly two weeks of intensifying operations. Tehran mirrored Washington’s posture, halting its own operations, while Iran and Oman engage in talks,” Patel added.
In the analysis, Patel stated that a return to diplomatic negotiations could raise hopes of more favorable conditions for maritime traffic, which he said could weigh on crude prices further.
“Markets could continue to monitor the developments in transit levels through the Straits of Hormuz and Bab al-Mandeb as easing shipping bottlenecks could drive prices toward their latest lows,” he said.
Looking ahead, Patel noted in the analysis that oil markets are likely to stay focused on the durability of the pause in military operations and the outcome of the Iran-Oman talks.
“Continued progress could help reduce shipping constraints, adding to downward pressure on crude,” he said.
“Conversely, any breakdown in negotiations could quickly reverse the recent decline,” he warned.
In market commentary sent to Rigzone on Monday, Aaron Kildow, Crude Commodity Owner at Sparta Commodities, outlined that “the first time the unimaginable happened the market ran $20 per barrel higher in just a week”.
“And now four months later, with the global oil market on arguably weaker footing it took three weeks to cover the same amount of ground,” he added.
In the commentary, Kildow highlighted that, in March, the market, “stunned by the gravity and relative ease with which Hormuz was effectively closed, saw a clear trade and seized it”.
“A few months later, serious peace prospects and meaningful work-arounds pressured futures markets back lower in June only for these hopes and solutions to be undone in July,” he added.
“From a technical trading standpoint, the gap higher in the Brent chart as the war kicked off was filled at the end of June (on continuation chart) and the Fibonacci retracement from the highs from the second week of March to the lows of June suggested a move back to the $100 per barrel area, a feat achieved this last week,” he went on to note.
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