Oil hits one-week low as investors shrug off US sanctions on Iran

Oil prices tumbled to a one-week low on Tuesday as traders disregarded the latest US sanctions threat against Iran. Brent crude futures slipped 35 cents, or 0.38%, to $91.82 per barrel, while US West Texas Intermediate crude dropped 41 cents, or 0.48%, to $84.60. The lowest levels were recorded since August 19 for Brent crude and August 17 for US West Texas Intermediate.

Head of commodity strategy at Saxo Bank, Ole Hansen, noted that the move from military conflict to economic pressure in the ongoing US-Israeli war with Iran has alleviated some of the market's concerns. Iran pledged retaliation against intensified US sanctions, which the Trump administration aimed to diminish Iran's economic foundation, confident that major trading partners would resist Washington's pressure campaign.

The Treasury Department cautioned countries against engaging with Iran to avoid secondary sanctions, but did not enforce penalties immediately. US Defense Secretary Pete Hegseth hinted that military action against Iran was not off the table, but economic coercion is now the focus, eliminating worries about further threats to Middle Eastern oil supply due to the conflict.

Despite these developments, risks to oil supply remain, as Iran can still disrupt shipping, keeping a premium in oil prices. A tanker was recently disabled in the Strait of Hormuz, and only two tankers passed through the key waterway on Monday, the lowest daily tally since early May. Growing concerns over the Strait of Hormuz, through which approximately one-fifth of global oil consumption once passed, have amplified fears of broader supply disruptions.