Key Points:
- Oil prices slipped on hopes Iran will join US talks in Islamabad.
- Ceasefire expires Wednesday; Trump “highly unlikely” to extend.
- Strait of Hormuz remains disrupted, fueling energy crisis fears.
- Market highly sensitive to negotiation updates.
Oil prices saw a slight dip on signs that Iran might participate in negotiations with the United States in Islamabad, ahead of the impending end of a ceasefire between the two nations. This news brought some relief to the market, which has been highly sensitive to geopolitical developments.
Brent crude dropped by as much as 1.1% to $94.44 a barrel, paring some of the 5.6% gains it made on Monday. Sources familiar with the plans, who wished to remain anonymous, indicated that Iran is sending a team to the Pakistani capital. However, it remains unclear who will lead the Iranian delegation, especially after Tehran had previously expressed reluctance to engage in further peace talks with the US.
President Donald Trump confirmed in a phone interview on Monday that Vice President JD Vance is scheduled to leave later on Monday to resume negotiations, expected “either Tuesday night or Wednesday morning.” Trump also stated it’s “highly unlikely” he would extend the current truce, which is set to expire on “Wednesday evening Washington time.”
Oil prices have been particularly volatile in recent days, swaying with rapidly changing perceptions of the negotiations’ status and the ability of ships to navigate the Strait of Hormuz. This critical waterway typically handles about a fifth of the world’s crude oil transit. The ongoing standoff over Hormuz threatens to worsen the global energy crisis and is just one of several unresolved issues between Iran and the US, which also include Iran’s nuclear capabilities and Israel’s invasion of Lebanon.
Dilin Wu, a research strategist at Pepperstone Group, commented on the situation, saying, “Either we move toward some form of de-escalation or this drags into a more prolonged disruption, especially around energy supply.” He added that “the market will be super sensitive to any headline updates in the next 24 hours.”
Monday’s trading session saw conflicting statements from President Trump regarding the timing and feasibility of the peace talks. Oil prices initially extended gains after he announced that the US would continue to block the strait for Iran-linked ships until a final agreement is reached.
Meanwhile, commercial shipping traffic through Hormuz remains virtually stalled. Tracking data showed only three vessels attempting to transit early Tuesday. The crisis had escalated over the weekend after the US Navy seized an Iranian vessel, and Iranian forces reportedly fired at ships and reimposed controls across the strait.
In a related diplomatic move on Monday, Chinese President Xi Jinping called for an immediate ceasefire and the restoration of normal transit through the waterway. This appeal came during a phone call with Saudi Crown Prince Mohammed bin Salman, according to a readout from China’s Foreign Ministry.
