Oil Prices Hold Steady Amid US Sanctions Uncertainty: What’s Next for

Oil prices steadied on Tuesday, after falling more than 2% in the previous session, as investors assessed the impact of harsher U.S. secondary sanctions against Iran. Brent crude futures were down 9 cents, or 0.1%, at $92.16 by 0104 GMT, while U.S. West Texas Intermediate crude was up 1 cent at $85.02 a barrel.

Sanctions Uncertainty Hits Oil Markets

Oil prices have been volatile in recent weeks, with U.S. crude oil falling to a one-week low on profit-taking after prices rallied over the previous two weeks. The latest dip in prices came as U.S. Treasury Secretary Scott Bessent unveiled an expansion of sanctions to cut off Iran's economic lifeline, forcing an end to the war between the two countries.

However, Bessent declined to identify the countries that would be targeted or to reveal when those penalties would take effect, saying he would instead give them time to comply with the new directive. This lack of clarity has left investors uncertain about the impact of the sanctions on the global oil market.

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Economic Coercion Takes Center Stage

Analysts say the U.S. is turning towards more economic coercion, which removes concerns about threats to Middle Eastern oil supply because of the war. "Markets appear to be pricing economic pressure as a lower-risk path for physical supply than kinetic action," said Tim Waterer, chief market analyst at KCM.

However, he warned that Iran still retains the ability to respond by disrupting shipping, which continues to keep a residual premium in the oil price. This is highlighted by the recent incident of an oil tanker being struck by an unidentified projectile and disabled about 9 nautical miles northeast of Oman's Ash Shishah.

Strait of Hormuz Remains a Key Dispute

Iran still maintains that it should control the Strait of Hormuz, which typically carries cargoes accounting for about 20% of global oil trade. On Monday, it named 45 tankers that had broken its rules on crossing the strait and threatened action against them, up to globalizing their cargoes.

The supply disruptions as a result of the U.S.-Israeli war on Iran have caused countries to draw down their commercial and strategic reserves. On Monday, the Department of Energy reported that stocks of crude oil in the U.S. Strategic Petroleum Reserve fell by about 3.7 million barrels to 289.7 million barrels last week, the lowest since November 1982.

Oil prices may continue to be volatile in the coming days as investors assess the impact of the sanctions and the potential for supply disruptions. The situation remains fluid, with the U.S. and Iran continuing to engage in a high-stakes game of economic coercion.

Source: JOY