Euro holds near three-month highs as investors await US sanctions to Iran

Oil prices declined more than $1 per barrel on Monday as investors cashed in on recent gains and awaited the U.S. announcement of forthcoming sanctions on Iran. Brent crude futures dropped $1.55, or 1.64%, to $92.84, while U.S. West Texas Intermediate crude fell $2.04, or 2.34%, to $85.02 per barrel. Both contracts had recorded a second consecutive weekly rise last week, surging over 5% as peace talks between the U.S. and Iran remained stalled, limiting oil shipments through the Strait of Hormuz, a vital route for global supplies.

The drop in oil prices came after a two-week rally, as traders anticipated the U.S. strategy to economically isolate Iran, set to be unveiled later Monday. U.S. Treasury Secretary Scott Bessent is expected to hold a press conference at 1 p.m. EDT (1700 GMT) to discuss the toughest sanctions in history that could be imposed on Iran.

President Donald Trump has also hinted at sanctions against Iran's trading partners. If the embargo is implemented, oil supply from the region would likely decrease, according to PVM analyst Tamas Varga. The U.S. plans to tighten its naval blockade against Iranian oil exports, and Iran might retaliate with further strikes against oil installations in the Middle East.

Iran has denounced the U.S. plans for new sanctions and President Masoud Pezeshkian has called for a diplomatic solution. Pakistan's army chief visited Tehran on Monday for mediation talks ahead of the U.S. announcement. The number of commodity vessels transiting the Strait of Hormuz decreased to fewer than 20 over the weekend, as Iranian and U.S. blockades hinder traffic through the crucial chokepoint for energy shipments.

Offers of Iranian crude to Chinese buyers have dwindled, and prices have risen as the U.S. blockade has restricted Tehran's shipments, according to trade sources. However, Iran has permitted Iraqi oil tankers to pass through the strait following repeated requests from Baghdad, as reported by Iran's state news agency IRNA. Brent crude prices have rebounded to around $92 per barrel, up from a low of $71 in June, due to inventory draws and the growing belief that Middle East disruptions may persist longer.

Morgan Stanley analysts have increased their Brent forecasts, predicting a peak at $100 in the fourth quarter.