Oil prices dip as US-Iran peace talk expectations rise
What's the story
Oil prices fell on Tuesday, reversing the sharp gains from the previous session. The decline comes as expectations of imminent US-Iran peace talks have eased fears of prolonged supply disruptions in West Asia. Brent crude futures fell by $0.95 or 1% to $94.53 per barrel while US West Texas Intermediate (WTI) crude for May dropped by $1.54 or 1.72% to $88.07 per barrel.
Price fluctuations
Dip in oil prices comes after major spike on Monday
The dip in oil prices comes after a major spike on Monday, when Brent surged 5.6% and WTI jumped by 6.9%. These spikes were triggered by Iran's renewed closure of the Strait of Hormuz and the US seizure of an Iranian cargo vessel under its blockade. Now, despite these ongoing disruptions, investors are optimistic that talks in Pakistan this week could extend the current ceasefire or even lead to a broader agreement allowing oil flows to resume.
Diplomatic uncertainty
Iran yet to confirm participation in talks
Despite the potential for peace talks, Iran has yet to confirm its participation. A senior Iranian official said the country is still weighing its options. Meanwhile, foreign minister Abbas Araqchi cited "continued violations of the ceasefire" by the US as a key obstacle. Iran's parliament speaker Mohammad Baqer Qalibaf also reiterated that Tehran would not engage in talks "under threats," highlighting the fragile diplomatic environment.
Shipping concerns
Analysts warn of potential price surge if talks fail
The Strait of Hormuz, which carries about one-fifth of global oil supply, remains a critical chokepoint with limited shipping. Analysts at Citi expect a ceasefire extension or memorandum of understanding this week but warn of a "more protracted disruption scenario" if talks fail. They also say that prolonged disruption could result in losses up to 1.3 billion barrels and push prices toward $110 per barrel in Q2 2026.