Oil prices fall as Bessent outlines new steps to punish Iran

Oil prices remained stable on Tuesday following a sharp decline of over 2% the previous day, as investors considered the effects of intensified U.S. secondary sanctions targeting Iran. Brent crude futures settled 9 cents lower, or 0.1%, at $92.16, while U.S. West Texas Intermediate crude rose 1 cent to $85.02 a barrel. Both contracts experienced declines of more than 2% on Monday, with U.S. crude oil hitting a one-week low amid profit-taking after recent price increases.

U.S. Treasury Secretary Scott Bessent announced on Monday an expansion of sanctions aimed at severing Iran's economic connections and potentially ending the ongoing war between the nations. However, he refrained from naming targeted countries or specifying when penalties would commence, instead urging countries to sever business ties or face exclusion from the dollar-based financial system.

Despite U.S. Defence Secretary Pete Hegseth's acknowledgment that the U.S. would not exclude military force as an option, analysts noted that the shift towards economic coercion has alleviated concerns about potential disruptions to Middle Eastern oil supply due to the conflict. While markets initially reacted negatively to the prospect of lower oil prices, KCM's Tim Waterer cautioned that Iran's capacity to respond through shipping disruptions continues to maintain a premium in oil prices.

A tanker was struck by an unknown projectile on Tuesday, causing it to be disabled approximately 9 nautical miles northeast of Oman's Ash Shishah, according to the United Kingdom Maritime Trade Operations. Iran maintains its claim to control the Strait of Hormuz, a route that historically carried around 20% of global oil trade before the ongoing war began in February.

On Monday, Iran listed 45 tankers that had violated rules related to the strait's use and threatened actions against them, including potential actions to seize their cargoes. The ongoing U.S.-Israeli war on Iran has prompted nations to reduce their commercial and strategic oil reserves. The U.S. Department of Energy reported on Monday that stocks in the U.S. Strategic Petroleum Reserve had fallen by approximately 3.7 million barrels to 289.7 million barrels, marking the lowest level since November 1982.