Oil prices edged higher on Tuesday, recovering from a sharp selloff in the previous session as traders balanced cautious optimism over US-Iran diplomatic progress with lingering uncertainty around crude flows through the Strait of Hormuz.
Brent crude futures rose 24 cents, or 0.38%, to US$78.15 a barrel, while US West Texas Intermediate gained 33 cents, or 0.46%, to US$74.19 a barrel as of 0026 GMT.
The rebound followed a more than 3% drop on Monday after Washington granted Iran a 60-day sanctions waiver following early-stage peace talks. Prices were also pressured by reports of reduced hostilities in Lebanon under the broader framework of the agreement.
Sentiment in the previous session was further shaped by shifting geopolitical signals, including renewed threats from US President Donald Trump to restart military action if Iran disrupted shipping through the Strait of Hormuz after Tehran declared the key waterway closed.
Despite the latest diplomatic developments, market participants remain cautious about the durability of any agreement. “There remains a prevailing dose of market scepticism, rooted in deep-seated mistrust between Washington and Tehran, suggesting that any return to pre-war oil prices is likely to be delayed rather than immediate,” said Tim Waterer, chief market analyst at KCM Trade.
Trump said in a post on Truth Social on Monday that Iran will agree to have weapons inspections to ensure “nuclear honesty.”
“If Iran doesn’t live up to their agreement, or if they’re not behaving, I will do what I have to do,” Trump later told reporters.
Waterer added that traders had initially priced in optimism over a potential reopening of the Strait of Hormuz but are now taking a more measured stance as they wait for evidence that the deal will hold and shipping flows will normalise.
Early shipping data showed two crude tankers carrying just under 2 million barrels of oil passing through the Strait of Hormuz on Monday, suggesting some recovery in traffic after weaker flows over the weekend.
On the supply side, US crude inventories in the Strategic Petroleum Reserve fell to 331.2 million barrels last week, the lowest level since June 1983, according to Department of Energy data. The decline reflects tighter supplies following the recent escalation in US-Iran tensions.
Reuters
