Oil prices experienced a decline on Tuesday following Iran’s announcement that it had reached an “agreement in principle” with the United States regarding a potential nuclear deal, which could lead to the lifting of certain sanctions against Iran.
Brent crude oil futures, the global price benchmark, slipped by 0.6%, trading below $67.50. Meanwhile, the U.S. benchmark, West Texas Intermediate (WTI) crude, dropped by 0.9% to settle at $62.25.
Iran’s Foreign Minister Abbas Araghchi commented on state television, stating, “We were able to reach an agreement in principle on a set of guidelines. Based on this, we will move forward to draft an agreement.”
For the past month, Iranian leaders have been engaged in discussions with U.S. Special Envoy Steve Witkoff. This development is perceived as a reduction in the likelihood of military conflict between the two nations, which historically would add an immediate risk premium to oil prices.
Iran holds significant sway over the Strait of Hormuz, a key shipping route where roughly 20 million barrels of oil pass each day. Any attempts to limit access to this strait or attacks on regional infrastructure could substantially elevate oil prices, as buyers would have to factor in longer shipping times and diminished supplies from the Middle East.
On the same day, Iranian officials declared plans to partially close the strait for military exercises for several hours, as reported by Bloomberg. This comes amid the U.S. building up its naval presence in the area, including deploying a second aircraft carrier last week. In February, U.S. maritime authorities had advised ship captains to steer clear of Iranian waters, citing concerns over possible sabotage or boarding incidents.
Despite the apparent progress toward a deal, Iran’s Supreme Leader Ayatollah Khamenei took to social media to express negative sentiments about U.S. involvement in Iran’s energy sector. “Americans are saying, ‘Let’s negotiate your nuclear energy, and the outcome of the negotiation should be that you don’t have this energy!'” he posted early Tuesday. He added, “If that is the case, there is no room for negotiation, but if there is really going to be negotiation, it would be wrong and foolish to decide the outcome of the negotiation in advance.”
