US President Donald Trump said on Monday that discussions with Iran were continuing, although Iran’s Tasnim News Agency reported that Tehran had suspended indirect talks with Washington.
Brent crude futures fell by 75 cents, or 0.79%, to $94.23 per barrel by early trading, while US West Texas Intermediate (WTI) crude dropped 85 cents, or 0.92%, to $91.31 per barrel.
The decline followed a sharp rally in the previous session, when both benchmark contracts gained more than 5%. Despite that surge, oil prices had recorded losses of more than 16% during May amid expectations that a peace agreement could ease tensions in the Middle East.
Priyanka Sachdeva, a senior market analyst at Phillip Nova, said markets had hoped to move beyond uncertainty because of prospects for a diplomatic breakthrough, but noted that the situation remained largely unchanged.
Adding to the mixed signals, Trump told CNBC on Monday that he would not be concerned if negotiations collapsed. However, shortly afterward, he stated on social media that talks were still progressing and later told ABC News that he expected an agreement to extend the ceasefire and reopen the Strait of Hormuz within the coming week.
Tim Waterer, chief market analyst at KCM Trade, said traders were closely monitoring any signs of progress or setbacks in negotiations, as well as Iran’s statements regarding the Strait of Hormuz and the movement of oil tankers through the region.
According to Waterer, the future direction of oil prices will largely depend on whether negotiations result in a concrete agreement or whether geopolitical tensions continue to support a risk premium in the market.
Meanwhile, Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday, a development that could help reduce tensions linked to the wider regional conflict involving Iran.
Tony Sycamore, market analyst at IG, said oil prices were likely to remain volatile as long as uncertainty persisted and headlines from the Middle East continued to influence market sentiment.
Since the outbreak of the conflict, Iran has effectively restricted most non-Iranian shipping traffic entering and leaving the Gulf, disrupting around one-fifth of global oil and liquefied natural gas flows and contributing to a significant increase in energy prices.
As a result, demand for alternative supplies has increased. US crude exports rose to a record 5.6 million barrels per day in May as refiners in Asia and Europe sought additional supplies amid concerns over Middle Eastern exports.
Market participants are also watching US inventory data closely. A preliminary Reuters survey indicated that US crude oil stockpiles likely declined by around 3.6 million barrels during the week ending May 29, extending the drawdown recorded in the previous week. Gasoline and distillate inventories are also expected to have fallen.
Shipping industry executives meeting in Athens on Monday stressed that any eventual agreement between Washington and Tehran must provide clear guarantees and guidelines for vessels to safely resume normal operations through the Strait of Hormuz, one of the world s most critical energy transit routes.
