[WORLD] Talks between Iran and the United States are expected to resume later this week, injecting fresh volatility into global oil markets. Prices had climbed earlier on Tuesday following a CNN report indicating that U.S. intelligence believes Israel is preparing to strike Iranian nuclear sites. The network, citing multiple American officials, noted that it remains unclear whether Israeli leadership has made a final decision on such an operation.
The possibility of renewed diplomatic engagement between Tehran and Washington has added a layer of uncertainty for traders, who are weighing the potential for a breakthrough that could eventually ease sanctions on Iranian oil exports. Analysts say progress in negotiations could unlock substantial new supply, exerting downward pressure on prices.
Brent crude futures settled 47 cents lower, or down 0.7%, at $64.91 a barrel. U.S. West Texas Intermediate (WTI) crude dropped 46 cents, also 0.7%, to close at $61.57 a barrel.
Iran, OPEC’s third-largest producer, remains a critical player in the global supply chain, and any Israeli military action could significantly disrupt its output. “We’re heading into another round of peace talks, which offset the risk premium that had been priced in,” said Phil Flynn, senior analyst at Price Futures Group.
Geopolitical tensions continue to weigh heavily on oil markets, particularly in the Strait of Hormuz—a strategic waterway through which a significant portion of the world’s oil passes. Any disruption there could send prices surging, especially as demand rebounds from pandemic-era lows. Nonetheless, the diplomatic overtures have so far eased fears of an imminent supply crisis.
Still, concerns persist that Iran could retaliate by obstructing tanker traffic through the Strait, a key export route for countries including Saudi Arabia, Kuwait, Iraq, and the UAE.
“If the situation escalates, we could see temporary trade disruptions or a supply hit of around 500,000 barrels per day—something OPEC+ could manage quickly,” said Priya Walia, an analyst with Rystad Energy.
Meanwhile, the market is keeping a close eye on OPEC+ developments, as some member states push back against coordinated production cuts. Kazakhstan, for instance, boosted output by 2% in May, according to an industry source, raising fresh concerns about unity within the alliance as prices hover near recent highs.
The broader sell-off in oil was also driven by bearish data from the U.S. Energy Information Administration, which reported unexpected builds across crude, gasoline, and distillate inventories last week.
Crude stockpiles rose by 1.3 million barrels, while gasoline inventories increased by 800,000 barrels. Distillate supplies were up by 600,000 barrels. The surprise builds have cast doubt on the strength of U.S. fuel demand heading into the summer driving season.
Some analysts attribute the increase to refinery maintenance and transportation delays, but others caution that weaker consumption could indicate a more sluggish recovery in energy demand than previously expected.
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