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

Oil prices remained stable on Tuesday, following a 2% drop the day before, as investors analyzed the effects of the United States' intensified secondary sanctions against Iran. Brent crude futures declined by 9 cents, or 0.1%, to $92.16 per barrel, while US West Texas Intermediate crude rose by 1 cent to $85.02 per barrel. Both contracts experienced a more than 2% decrease on Monday, with US crude oil reaching a one-week low after a rally over the previous two weeks.

On Monday, US Treasury Secretary Scott Bessent announced an expansion of sanctions to sever Iran's economic lifeline, urging countries to sever their business ties or face exclusion from the dollar-based financial system. Bessent did not specify which countries would be targeted or provide a timeline for the penalties, offering them time to comply with the new directive.

Defense Secretary Pete Hegseth suggested the US would not rule out military force against Iran, but Iran is increasingly focusing on economic pressure, which analysts believe has alleviated concerns about potential threats to Middle Eastern oil supply due to the ongoing war.

While the markets seem to view economic pressure as a less risky route to maintaining physical supply than military action, Tim Waterer, chief market analyst at KCM, cautioned that Iran still has the capacity to disrupt shipping and maintain a residual premium in oil prices. A tanker was hit and disabled by an unidentified projectile about 9 nautical miles northeast of Oman's Ash Shishah on Tuesday, according to the United Kingdom Maritime Trade Operations.

Iran continues to assert its control over the Strait of Hormuz, which traditionally carried cargoes equivalent to about 20% of global oil use before the war began in February. The country named 45 tankers that violated its rules on crossing the strait and threatened action against them, including confiscating their cargoes. The supply disruptions resulting from the US-Israeli war on Iran since February 28 have led countries to reduce their commercial and strategic reserves.

On Monday, the Department of Energy reported a decline in US Strategic Petroleum Reserve stocks by about 3.7 million barrels to 289.7 million barrels, the lowest level since November 1982.