Global oil prices experienced a decline of around 1% on Tuesday, attributed to renewed diplomatic efforts involving Iran aimed at easing tensions in the Middle East and reducing potential disruptions to energy supplies. Despite a temporary dip, ongoing regional attacks and uncertainties surrounding shipping routes have kept prices relatively high.
Brent crude futures saw a decrease of $1, or 0.86%, settling at $114.81 per barrel, while US West Texas Intermediate crude fell by 88 cents, or 0.86%, to $100.88 per barrel. Earlier in the session, both benchmarks had decreased by about 1%.
Key diplomatic discussions took place on Monday in Tehran, where officials from Saudi Arabia, Türkiye, and Pakistan met with Iranian counterparts to discuss easing regional tensions. These countries agreed to maintain negotiations focused on enhancing peace and security cooperation. The prospect of diplomatic progress encouraged some investors to secure profits following a surge in oil prices to multi-month highs.
However, the outlook for peace remains uncertain, as Iran-aligned Houthi forces have resumed attacks on Saudi Arabia. This conflict has heightened risks for commercial shipping around the Strait of Hormuz, a critical channel that previously carried about one-fifth of global energy supplies before the onset of conflict in February.
Supply pressures in the oil market persist, with Gulf crude exports declining for four consecutive weeks and oil flows through the Strait of Hormuz reduced to approximately 60% of normal levels. Additionally, global distillate inventories are nearly 5% below their five-year average.
While diplomatic efforts may help to alleviate some supply concerns, the persistent geopolitical tensions and disruptions to energy transportation continue to pose significant threats to market stability.