Oil steadies as investors weigh impact of latest US sanctions on Iran

Oil prices rebounded on Tuesday (August 25) as investors focused on the impact of the latest US sanctions against Iran, according to market reports. Brent crude futures climbed by $0.27, or 0.3%, to $92.44 a barrel, while US West Texas Intermediate crude increased by $0.37, or 0.4%, to $85.38. Prices had fallen on Monday, hitting a one-week low due to profit-taking after recent rallies.

ING commodity strategists noted that the US effort to pressure partners away from Iranian trade was perceived as marginal rather than market-moving. US Treasury Secretary Scott Bessent unveiled expanded sanctions to cut off Iran's economic lifeline, urging countries to sever their business ties or face exclusion from the US dollar-based financial system.

The sanctions were implemented to end the war between the US and Iran, with the Treasury official declining to specify targeted countries or the timing of the penalties. Although US Defence Secretary Pete Hegseth hinted at the possibility of military action against Iran, analysts emphasized that economic coercion was being prioritized, which removed concerns about potential threats to Middle Eastern oil supply.

However, Iran's ability to respond by disrupting shipping remained a concern, keeping a slight premium in oil prices. A tanker was reportedly disabled by an unidentified projectile about 16.7 km north-east of Oman's Ash Shishah, the UK Maritime Trade Operations reported. Iran has maintained its claim to control the Strait of Hormuz, which typically carries about 20% of global oil use.

The US-Iranian war, which began on February 28, has led countries to reduce their commercial and strategic reserves. The US Department of Energy reported that crude oil stocks in the US Strategic Petroleum Reserve fell by approximately 3.7 million barrels to 289.7 million barrels last week, the lowest level since November 1982.