Oil Falls for a Third Day, Market Weighs US-Iran Nuclear Deal
Oil prices fell for a third consecutive day, as investors assessed the chances of a nuclear deal between Washington and Tehran—which could potentially mitigate the risk of a US military strike against Iran. Oil prices remain highly sensitive to Middle East headlines, so shifts in the diplomatic narrative could quickly erode or add to the risk premium.
The WTI contract fell around 1% to close below US$66 per barrel, while Brent closed below US$71. The declines followed reports indicating Iran was ready to push for a deal as soon as possible, although the market remained skeptical about its chances of success.
The price declines were not aggressive because signs of escalation had not completely disappeared. The market remained mindful of the increasing accumulation of US military assets in the region and US President Donald Trump's statement that a failure to reach a deal would be a "very bad" situation for Iran. In such a context, prices often move in a tug-of-war between hopes for de-escalation and the risk of unmanageable escalation.
In terms of supply risk, the market's greatest concern remains the Strait of Hormuz—a vital waterway that handles approximately a quarter of global seaborne oil trade and is also crucial for the LNG market. The threat of disruption to this waterway, even without a complete shutdown, is considered sufficient to trigger a rapid repricing of crude if tensions worsen.
Nuclear negotiations are scheduled to continue Thursday in Geneva, and this meeting is seen as a crucial point in assessing whether diplomacy can reduce geopolitical premiums or prolong uncertainty. In this phase, market participants tend to "buy protection" through hedging positions, so volatility remains high despite weakening prices.
Interestingly, the rise in oil prices throughout this year has occurred despite many previous projections predicting the market would face a potential global supply surplus. Some industry players are beginning to assess that oversupply concerns are less severe than initially estimated, especially if demand remains more solid than expected.
In the derivatives market, caution is also evident in the dynamics of price structures and shipping costs. Market participants believe geopolitical risks will become "evident" if there are signs of real disruption—whether from product tightening, steeper changes in the curve structure, or pressure on logistics.
Source: Newsmaker.id
