Oil prices rose more than 1.5% in Asian trade on Thursday, on increasing concerns of a U.S military attack on Iran that could disrupt supply from the region.
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Oil prices slid Monday as investors dialed back fears of a supply shock after U.S. President Donald Trump’s statements on Iran signaled a possible easing in tensions between Tehran and Washington.
Trump has repeatedly warned Iran of a possible intervention if it failed to reach a nuclear deal or continued cracking down on domestic protests, which Tehran claims are fueled by the West. On Saturday, he told reporters that Iran was “seriously talking” with the U.S.
His comments came after Iran’s top security official Ali Larijani said on X that preparations for negotiations were under way.
Oil prices rose to a six-month high recently amid fears the United States could carry out a military strike against Iran. Washington last week deployed a “massive Armada” toward Iran, a move that raised fears of a confrontation with the Middle Eastern country.
Global benchmark Brent fell as much as 6.4% to $66.15 a barrel on Monday, LSEG data showed, and was last 4.41% lower. The U.S. West Texas Intermediate futures were 4.75% lower at $62.11 per barrel.
Andy Lipow, president of Lipow Oil Associates, said the renewed slide in prices follows reports that Washington and Tehran have been communicating through intermediaries, raising hopes that tensions could ease rather than spiral.
“The talks are happening at the same time Iran is threatening a regional war should they be attacked, which could lead to substantially higher oil prices, an outcome that the Trump Administration would like to avoid,” he told CNBC.
Marko Papic, BCA Research macro and geopolitical strategist, added that the U.S. administration’s sensitivity to oil prices could act as a brake on further escalation. “I do think that President Trump is concerned that if oil prices go up to, you know, $70-$80, he’s going to get even further into a hole ahead of the midterms.”
The U.S. faces midterm elections later this year, and fuel prices have traditionally been a sensitive political issue for voters.
Diplomatic feelers also come at a time when additional supply is quietly entering the market. Venezuelan crude, much of it drawn from offshore and onshore inventories rather than new production, is adding to available barrels, even as global oil production continues to exceed demand.
Both experts said those flows are helping cap prices even as OPEC+ continues to manage output carefully.
“While additional quantities of Venezuelan oil are coming to market as offshore and on shore inventories are liquidated and sold, the oil market will also continue to be supported by OPEC+ decision to hold steady its current production levels,” said Lipow.
The oil cartel on Sunday decided to leave production levels unchanged for March, extending a three-month supply freeze.