Oil prices pull back after rally as markets brace for tougher Iran sanctions

Oil prices fell on Monday after a strong weekly rally, as traders cashed in profits ahead of a US announcement of tougher sanctions on Iran. Brent crude dropped to around US$93 a barrel, while US crude declined to about US$86, following major gains last week. The drop occurred as investors awaited details of Washington's latest measures against Tehran, with US Treasury Secretary Scott Bessent announcing the "toughest" sanctions in history.

These measures are expected to increase economic pressure on Iran and countries trading with it, potentially further tightening global oil supplies. Iran dismissed the latest sanctions threat, stating it has experienced economic blockades for decades and can withstand further pressure while maintaining trade relations. Strait of Hormuz tensions remain high, with shipping traffic at significantly reduced levels, causing heightened sensitivity in oil markets.

The broader market was also influenced by the US dollar's weakness, with the dollar index holding steady around 98.8 after a significant decline last week. Bessent also proposed a "Treasury twist" strategy, aiming to influence the yield curve and manage borrowing costs. Market volatility is expected in the coming days due to Middle East tensions, oil supply disruptions, US fiscal concerns, and the Federal Reserve's policy outlook.