Oil falls ahead of US announcement of new sanctions on Iran

On Monday, oil prices declined by over $2 per barrel as investors took profits after recent gains and anticipated the potential new U.S. sanctions on Iran, which could further impede Middle Eastern supplies. Brent crude futures dropped $1.71, or 1.81 percent, to $92.69, while U.S. West Texas Intermediate crude fell $1.72, or 1.98 percent, to $85.34.

Both contracts had recorded a second consecutive weekly increase last week, rising more than 5 percent as peace talks between the U.S. and Iran remained stalled, limiting oil shipments through the Strait of Hormuz. U.S. Treasury Secretary Scott Bessent was set to release new measures on Monday to expand secondary sanctions on entities and countries with economic ties to Iran.

President Donald Trump also threatened to impose sanctions on Iran's trading partners. Analysts warned that should the embargo be implemented, oil supply from the region would decline, and the U.S. might tighten its naval blockade against Iranian oil exports. Iran denounced the U.S. plans, with President Masoud Pezeshkian calling for a diplomatic resolution.

Pakistan's army chief was in Tehran for mediation talks ahead of the U.S. announcement. Shipping data revealed fewer than 20 commodity vessels transited the Strait of Hormuz over the weekend, as Iranian and U.S. blockades restricted traffic through the crucial energy shipping route. TotalEnergies CEO Patrick Pouyanne stated that the company was successfully moving oil through the Strait of Hormuz, with higher transport costs outweighed by low crude producer discounts.

Iraq's SOMO and QatarEnergy offered crude for loading inside the strait in tenders, according to traders. While Brent crude at $93 per barrel indicated sufficient oil flow through the Strait of Hormuz, SEB analyst Bjarne Schieldrop suggested a turning point could arise if Iran decided to close the strait with rockets and drones.

Notably, Morgan Stanley analysts had raised their Brent forecasts, projecting a peak of $100 per barrel in the fourth quarter, while the International Energy Agency was not currently considering a second release of oil from strategic reserves.