Key Points:
- WTI crude dropped to near $62 a barrel on Tuesday.
- Iran confirmed a “general agreement” on nuclear talks with the US.
- A potential deal would lift sanctions and lower war risks.
- Automated trading programs triggered a sell-off as prices dipped.
Oil prices slipped on Tuesday as traders reacted to signs of a diplomatic breakthrough between the United States and Iran. West Texas Intermediate (WTI) fell to settle near $62 a barrel. The decline came after Iranian Foreign Minister Abbas Araghchi stated that the two nations had reached a “general agreement” to serve as the foundation for a new nuclear deal.
This news immediately eroded the “risk premium” that has kept oil expensive this year. Investors hope a final deal will lift sanctions on Tehran and significantly lower the chance of a war in the Middle East.
According to a U.S. official, negotiators from Tehran will return with a concrete proposal in two weeks. While Araghchi warned that the next phase will be “more difficult and detailed,” the initial progress was enough to calm the market.
Tensions did flare briefly earlier in the day. Iran announced it would close parts of the Strait of Hormuz for several hours to conduct military drills. This waterway is vital, carrying about one-fifth of the world’s oil. However, traders largely brushed off the threat, doubting any serious disruption would happen. As a precaution, the U.S. deployed a second aircraft carrier to the region.
U.S. Vice President JD Vance commented on the situation Tuesday, noting that negotiations went well. However, he added a note of caution, stating that Iran has not yet acknowledged President Donald Trump’s “red lines.”
Computer algorithms played a major role in the price drop. According to data from Kpler’s Bridgeton Research Group, automated trading programs hit “sell” triggers once the price neared $62. These robot traders quickly dumped their long positions, accelerating the slide.
Beyond the Middle East, markets are watching Geneva. Peace talks regarding the war in Ukraine are scheduled over the next two days. However, expectations are low for a quick resolution to the four-year conflict. While oil prices remain up about 10% for the year, the success of these diplomatic efforts will determine if prices crash further or rebound.
