Oil prices extended their recent decline on Tuesday, falling to two-week lows as markets cautiously welcomed the pause in hostilities between the United States and Iran, raising hopes that diplomacy could eventually reduce disruptions to Middle East energy supplies. Despite improving sentiment, uncertainty remained high as negotiations showed little tangible progress and key shipping routes continued to face restrictions.
Brent crude settled at $84.09 per barrel, down 4.8%, while West Texas Intermediate (WTI) fell 4.1% to $79.26 per barrel. After three consecutive days of losses, Brent had declined roughly 16% and WTI reached its lowest settlement since mid-July.
Although direct military exchanges have paused, Iran and the United States remain divided over the future of the Strait of Hormuz. Iran rejected a Gulf-backed proposal to restore normal shipping through the waterway and instead proposed a temporary traffic arrangement, while attacks by Yemen’s Houthi forces continued to threaten shipping through the Bab el-Mandeb Strait. Saudi Arabia also faced additional supply concerns after an attack forced the shutdown of its 400,000-barrel-per-day Jizan refinery.
Markets also monitored broader supply developments, including discussions of potential peace talks between Russia and Ukraine that could eventually increase Russian oil exports if sanctions are eased. Meanwhile, reports indicated OPEC+ is likely to pause planned production increases later this year after completing the return of previously voluntary production cuts, providing additional support for oil prices despite the recent pullback.