Oil prices steady as investors weigh impact of expanded US sanctions against Iran

On Tuesday, Aug 25, oil prices steadied after falling more than 2% on Monday (Aug 24). Brent crude futures dropped 9 cents, or 0.1%, to $92.16, while US West Texas Intermediate crude rose by 1 cent to $85.02 a barrel. The stabilization came as investors evaluated the impact of harsher US secondary sanctions against Iran, aimed at forcing an end to the ongoing war between the two nations.

Treasury Secretary Scott Bessent announced the expanded sanctions on Monday, but did not specify which countries would be targeted or when the penalties would take effect. US Defense Secretary Pete Hegseth hinted that military force against Iran was not ruled out, yet analysts suggested investors were pricing economic pressure as a lower-risk path for oil supply compared to military action.

This led to the initial response of oil prices moving lower rather than spiking higher. However, Iran's capability to respond through disrupting shipping remained a concern, keeping a premium in the oil price. A tanker was struck by an unknown projectile off the coast of Oman on Tuesday, further highlighting these threats. Iran maintains control over the Strait of Hormuz, a key shipping route that typically carries 20% of global oil use.

The US has named 45 tankers that violated the strait's rules, with the potential for confiscating their cargoes. The supply disruptions resulting from the US-Israeli war on Iran have led countries to draw down their commercial and strategic reserves. As of Monday, the US Strategic Petroleum Reserve's crude oil stocks had fallen to 289.7 million barrels, the lowest level since November 1982.