Oil prices moved sharply lower on Monday, dropping more than 1% as concerns over potential supply disruptions in the Middle East eased following renewed diplomatic engagement between the United States and Iran over Tehran’s nuclear programme.
Brent crude futures were down 84 cents, or 1.2%, at $67.21 a barrel by 07:47 GMT, while U.S. West Texas Intermediate crude fell 82 cents, or 1.3%, to $62.73.
“With more talks on the horizon, the immediate fear of supply disruptions in the Middle East has eased quite a bit,” said IG market analyst Tony Sycamore.
Both Washington and Tehran said they would continue indirect negotiations after what they described as constructive discussions held on Friday in Oman. The development helped reduce concerns that a collapse in talks could push the region closer to open conflict, particularly given the recent buildup of U.S. military forces in the area.
Roughly one-fifth of global oil consumption flows through the Strait of Hormuz, the strategic waterway between Oman and Iran, underscoring why tensions in the region remain a key risk factor for energy markets.
Last week, both Brent and WTI posted declines of more than 2%, marking their first weekly drop in seven weeks as geopolitical tensions showed signs of easing.
However, underlying risks remain. Iran’s foreign minister warned that the country would target U.S. military bases in the Middle East if attacked, highlighting the fragile nature of the current calm.
“Volatility remains elevated as conflicting rhetoric persists. Any negative headlines could quickly reignite risk premiums in oil prices this week,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Market participants are also monitoring Western efforts to limit Russia’s oil revenues, which help fund its war in Ukraine. On Friday, the European Commission proposed a broad ban on services that support Russia’s seaborne crude exports.
At the same time, refiners in India—previously the largest buyers of Russian seaborne oil—are avoiding April cargoes and are expected to stay on the sidelines for longer, according to refining and trade sources. The shift could also support New Delhi’s efforts to finalise a trade agreement with Washington.
“Oil markets will remain sensitive to how broadly this pivot away from Russian crude unfolds, whether India’s reduced purchases persist beyond April, and how quickly alternative flows can be brought online,” Sachdeva added.