Oil prices dip as US-Iran tensions ease, supply risks linger

Oil prices dipped to a one-week low on Tuesday, driven by optimism surrounding a potential resolution to the US-Iran conflict. Brent crude futures saw a 0.57% decrease, settling at $87.86, while US West Texas Intermediate crude fell 0.45% to $82.24 a barrel. Both benchmarks had previously experienced an 8% slide, reaching their lowest point since July 20, following the US's unexpected suspension of air strikes against Iran over the weekend.

US President Donald Trump indicated on Monday that "good talks" were underway with Iran, suggesting a possibility for resolution. However, he cautioned that US strikes would resume if negotiations falter, a sentiment echoed by Iran regarding potential retaliation. IG analyst Tony Sycamore noted that the immediate relief from finding an "off-ramp" has cooled prices, but the situation remains highly volatile.

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For now, the relief that an off-ramp has been found has taken the heat out of prices. However, the situation remains highly fluid.

Further pressure on oil prices came from the news that the Caspian Pipeline Consortium's Black Sea terminal on the Russian coast had resumed oil loadings after a week-long halt due to Ukrainian drone attacks. Despite these developments, analysts warn that the risk of supply disruptions extending to the Red Sea remains elevated. Saudi Arabia reported shooting down drones targeting petroleum sites, including in Riyadh, and attributed the attacks to Iran-backed groups operating from Iraq, reserving the right to retaliate. Barclays analysts highlighted that flows through the Strait of Hormuz remain subdued, averaging 2.9 million barrels per day in the week ending July 24, a significant drop from 5.9 million in the preceding week.

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flows through the strait remain subdued