Oil prices slip over $1 as US weighs ‘D-Day’ Iran sanctions

Oil prices experienced a decline of over $1 per barrel on Monday as investors capitalized on the upcoming announcement of new sanctions against Iran by the United States. Brent crude slipped 1.90% to $92.60 a barrel, while WTI crude dropped 1.96% to $85.35 per barrel, according to data as of 7:30 am IST. The recent drop came after both benchmarks had surged more than 5% the previous week, marking their second consecutive weekly gains.

This surge was fueled by a deadlock in US-Iran peace talks, which had led to a significant reduction in oil shipments through the Strait of Hormuz, a vital waterway that once carried a fifth of the world's oil supply.

The main focus now lies on the planned sanctions, with US Treasury Secretary Scott Bessent set to deliver a press conference at 2 pm EDT (1800 GMT) on Monday. He has warned of the toughest sanctions in history against Iran and President Donald Trump has threatened measures against countries trading with Tehran. However, if these US measures prove effective, Iran's response through heightened violence could pose a growing risk to energy markets.

Iran has vehemently rejected the planned sanctions, with President Masoud Pezeshkian calling for a diplomatic resolution instead. Meanwhile, Iran has allowed several Iraqi oil tankers to pass through the Strait of Hormuz after repeated requests from Baghdad, according to Iran's state news agency IRNA.

In response, the US has threatened broader economic pressure, describing the upcoming measures as "the greatest financial offensive ever marshaled" against Iran. Treasury Secretary Bessent has outlined these measures in a Financial Times opinion piece, warning countries that maintain economic and financial ties with Iran about the potential consequences of continuing those relationships.

China, which imports half of its oil from the Gulf region through the Strait of Hormuz, has been urged by Bessent to cooperate with the US, emphasizing that sanctions and pressure do not help resolve the issue. Instead, they call for diplomacy.

Iran has been preparing for the new sanctions and has issued strong warnings about potential economic repercussions. Secretary of Iran's Supreme National Security Council Mohsen Rezaei stated that Tehran might halt all oil exports if the pressure continues, either through the Strait of Hormuz or from anywhere in the Persian Gulf.

Iran has also threatened to consider any country's participation or support for the US economic war against Iran as an act of war. The country's ability to disrupt energy supplies remains a significant concern for oil markets, as its missile and drone capabilities pose a threat to Gulf neighbors and oil tankers in the Strait of Hormuz.

However, the condition of Iran's nuclear program remains unknown, and both the US and Israel have aimed to destroy it. Despite the uncertainty surrounding Iran's nuclear program, oil prices have remained volatile as the conflict persists.