Brent crude prices dropped more than 1% on Tuesday after Iran’s foreign minister said the United States and Iran had reached an understanding on the main “guiding principles” of their nuclear talks, easing investor fears of rising tensions.
Brent crude futures fell 94 cents, or 1.4%, to $67.71 a barrel, following a 1.33% gain on Monday. U.S. West Texas Intermediate crude edged down 10 cents, or 0.2%, to $62.79 a barrel, though Monday’s trading was affected by the Presidents’ Day holiday in the U.S.
Many Asian markets were closed for Lunar New Year, including China, Hong Kong, Taiwan, South Korea, and Singapore.
Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet, said oil prices are likely to remain volatile, driven by diplomatic signals rather than supply-demand fundamentals.
Washington and Tehran held indirect talks in Geneva amid a U.S. military buildup in the Middle East. Iran’s supreme leader warned any attempt to depose his government would fail. Foreign Minister Abbas Araqchi said progress does not guarantee a quick agreement but marks a path forward.
Iran also announced temporary closures of parts of the Strait of Hormuz for security precautions during military drills, a move closely watched by investors given the strait’s importance as a major oil export route.
Meanwhile, U.S.-brokered peace talks between Ukraine and Russia continued in Geneva, with the Kremlin signaling territory as the main discussion point. Ukrainian forces reported strikes on Russian energy infrastructure, including the Ilsky refinery and Taman port.
Production at Kazakhstan’s Tengiz oil field is gradually recovering after an outage in January, according to Russian news agency Interfax.
Sachdeva noted that market sentiment remains closely tied to the tone and progress of these negotiations, sustaining a geopolitical risk premium in oil prices.