Oil Prices Fall, Iran's Presence in Islamabad Eases Risk Premium
Oil prices weakened after signs emerged that Iran would attend negotiations with the United States in Islamabad before the ceasefire expires. This correction followed a strong rally in the previous session, when the market increased risk premiums amid disruptions to energy shipping access.
Brent fell as much as 1.1% to $94.44 per barrel after rising 5.6% on Monday. Iran is said to be sending a team to Pakistan, although it is unclear who is leading the delegation, after Tehran previously expressed hesitation about participating in further talks.
From the US side, Vice President JD Vance is scheduled to depart for further negotiations "Tuesday night or Wednesday morning," according to President Donald Trump. Trump also said it was "very unlikely" to extend the ceasefire, which expired "Wednesday night Washington time," leading market participants to believe diplomatic space remains limited and highly sensitive to headlines.
In recent days, oil prices have been volatile as market perceptions of the status of negotiations and whether ships can pass through the Strait of Hormuz, a waterway that typically handles about one-fifth of global oil flows. Pepperstone's Dilin Wu believes the market will be highly reactive to headline updates in the next 24 hours, given the risk of widespread supply disruptions if de-escalation fails.
On the ground, Hormuz flows have yet to recover, with shipping nearly stagnant, with three attempts to cross early Tuesday morning. The crisis escalated over the weekend after the US Navy seized an Iranian vessel, while Iranian forces reportedly fired on the vessel and re-imposed controls in the strait. Chinese President Xi Jinping also abruptly called for an immediate ceasefire and the restoration of normal transit through Hormuz.
In recent trading, June Brent fell 0.6% to $94.91 per barrel (12.04 Singapore time), while June WTI fell 0.98% to $86.56; the less active May WTI contract fell 1.1% to $88.59 ahead of expiry on Tuesday. If signs of talks continue, pressure on oil could ease and alleviate near-term inflation concerns, but any new disruptions in Hormuz could potentially lift risk premiums. For gold, a lull in oil prices typically dampens inflationary pressures, but geopolitical conditions could still maintain demand for hedging.
5 key points (detailed & simplified):
-Oil fell on signals Iran would attend US negotiations in Islamabad ahead of the ceasefire's end.
-Brent fell as much as 1.1% to $94.44 after rising 5.6% on Monday; in Asia, June Brent fell 0.6% to $94.91 and June WTI fell 0.98% to $86.56.
-Trump said JD Vance departed for negotiations Tuesday night/Wednesday morning and assessed the likelihood of extending the ceasefire, which expires Wednesday night Washington time, as unlikely.
-Markets remain volatile as shipping access in Hormuz remains unregulated; flows are said to be nearly stagnant despite transit efforts.
-Price risks remain high: Citi estimates oil could reach $110 if disruptions persist for months, and the IEA assesses that energy volatility could persist; as a result, oil and gold remain sensitive to headlines, inflation, and risk sentiment.(asd)
Source: Newsmaker.id
