(Investing) – Oil prices fell on Tuesday as markets parsed mixed signals on fresh U.S.-Iran talks before the expiry of a temproary ceasefire later this week.
Brent oil futures, the global benchmark, were last lower by 0.5% at $94.95 a barrel, while U.S. West Texas Intermediate crude futures for May had dropped 1.8% to $88.04 a barrel.
Crude prices had risen sharply in the prior session, reversing steep losses notched last week, after tensions between the U.S. and Iran escalated over the weekend. The U.S. seized an Iranian-flagged cargo ship, leading to a threat of retaliation from Tehran. Iran also once again shuttered the Strait of Hormuz, despite having reopened the vital waterway to commercial shipping traffic on Friday, citing an ongoing U.S. blockade of Iranian ports and coastline.
President Donald Trump said on Monday that the naval blockade will remain in place until a peace deal is achieved, although the prospect of new discussions between the U.S. and Iran were mired in uncertainty.
Trump had earlier said that more negotiations with Iran were set to happen this week, with a delegation expected to reach Pakistan either on Tuesday or Wednesday.
But Iranian officials have publicly opposed more peace talks with Washington. Iran’s Speaker of the Parliament and top negotiator, Mohammad Bagher Ghalibaf, said the country would not accept negotiations “under the shadow of threats” from Washington.
Several Iranian state media reports also showed officials opposing more dialogue. But media reports said Iran had privately told regional mediators that it will send a delegation to Pakistan this week.
“Ongoing uncertainty continues to overshadow any peace agreement, as Iran remains reluctant to attend a second round of talks in Pakistan,” ANZ analysts said in a note.
Meanwhile, the clock is counting down to the end of a pause to the fighting later this week, although the exact timing of the deadline remained unspecified. Trump announced the two-week ceasefire on April 7 at 6:32 p.m. ET (22:32 GMT).
Hormuz shipping disruptions in focus
At the same time, shipping activity through the Strait of Hormuz, a conduit used by roughly a fifth of the world’s oil, has stayed all but closed.
Iran has effectively blocked the passage since the onset of the war in late February. While the initial oil price spike sparked by this disruption has tempered, crude is still well above pre-war levels.
However, ANZ analysts noted efforts by Saudi Arabia and UAE to bypass shipments through Hormuz. The countries were using the Yanbu and Fujairah terminals, located in the Red Sea and the Gulf of Oman, respectively, to load oil and avoid Hormuz.
ANZ said combined loading at the facilities had risen to 6.5 million barrels per day, up from 5.0 million bpd seen before the war.
(Ambar Warrick contributed reporting)
