Oil Prices Fall as Market Awaits New U.S. Sanctions on Iran

Oil prices moved lower Monday morning as the market took profits following two consecutive weeks of gains and awaited details of new U.S. sanctions targeting Iran. WTI fell more than $1.50/bbl in morning trading to around $85.50/bbl after gaining roughly $5.50/bbl last week. Brent also moved lower, trading near $93/bbl. Despite Monday's decline, continued restrictions on crude shipments through the Strait of Hormuz and the prospect of tighter U.S. sanctions on Iranian petroleum flows remain bullish factors for crude prices.

U.S. Treasury Secretary Scott Bessent is expected to outline additional sanctions against Iran on Monday afternoon, with the measures expected to target entities that purchase and transport Iranian petroleum. The announcement follows threats from the Trump administration to increase economic pressure on Iran and its trading partners. Additional restrictions could further reduce Iranian crude exports at a time when supply routes in the Middle East remain constrained.

Iranian crude shipments to Asia have nearly stopped over the past week as the U.S. blockade in the Strait of Hormuz has increased the cost and difficulty of moving Iranian cargoes. Fewer than 20 commodity vessels transited the strait over the weekend as U.S. and Iranian restrictions continued to limit traffic through the key energy chokepoint. Before the conflict, the Strait of Hormuz handled roughly one-fifth of global oil flows.

Some cargo movement is continuing. Iran granted permission for several Iraqi oil tankers to pass through the Strait of Hormuz following Baghdad's request. The exemptions provide a limited route for Iraqi exports but do not represent a broader reopening of the waterway. Iran has also called for a diplomatic solution, while mediation efforts continue. Chinese Vice Foreign Minister Miao Deyu met with Iranian Deputy Foreign Minister Kazem Gharibabadi in Beijing last week, as China reiterated its interest in advancing negotiations.

Elsewhere in the region, Saudi Arabia is evaluating alternative crude export routes as continued Houthi threats complicate Red Sea shipping. Cargoes could be redirected around Africa, adding considerable distance and transportation costs to deliveries. Combined with restricted Strait of Hormuz traffic, continued Red Sea risks reinforce the logistical challenges facing Middle Eastern crude exports.

For fuel buyers, Monday's decline provides some relief following last week's rise, but geopolitical conditions remain the primary driver of crude prices. Details of the new U.S. sanctions and Iran's response will be closely watched throughout the day. Measures that further restrict Iranian exports or traffic through the Strait of Hormuz would be bullish for prices, while progress toward diplomacy or increased vessel traffic through the strait could move prices lower.