Oil slips as traders lock in gains ahead of US Iran sanctions

Oil prices fell more than $1 a barrel on Monday as traders locked in last week’s gains ahead of an expected US announcement on tougher sanctions against Iran. Brent crude was at $93.16 a barrel, down $1.23, and West Texas Intermediate stood at $85.70, down $1.36, at 0329 GMT.

Treasury Secretary Scott Bessent is due to outline the administration’s next steps at a press conference after warning Washington was preparing its toughest sanctions yet on Iran. President Donald Trump has also threatened penalties on countries and companies that continue to trade with Tehran.

Both benchmarks rose more than 5% last week, their second straight weekly increase after diplomatic ties between Washington and Tehran deteriorated. The Strait of Hormuz has historically carried about one-fifth of global oil supplies, so any escalation could affect flows through the waterway.

Iran rejected the planned US restrictions, and President Masoud Pezeshkian reiterated calls for a diplomatic solution. Tony Sycamore, an analyst at IG Markets, cautioned: “The balance of power within Tehran could become clearer by the end of the week, with more pragmatic figures favouring de-escalation while hardliners may push for continued confrontation.”

Traders reported that offers of Iranian crude to Chinese buyers have fallen and prices have firmed as measures constrained shipments. Iranian state media said Tehran allowed several Iraqi oil tankers to transit the Strait of Hormuz after requests from Baghdad.

Analysts at Morgan Stanley said oil held on tankers has dropped sharply in recent weeks and onshore inventories, including in China, are also declining. The bank added that Middle Eastern exports have fallen back to levels seen in March and April and pushed back expectations for a recovery in regional supply.

Hedge funds and other energy investors are weighing the impact of tightening physical markets, geopolitical risk and possible tougher US sanctions. Market participants are monitoring shipping activity through the Strait of Hormuz and official US announcements for further direction on supply.