Oil Prices Slip as U.S.-Iran Peace Talks and Strait of Hormuz Risks Keep Markets on Edge

Oil prices edged lower during early Asian trading on Tuesday as investors weighed the possibility of renewed diplomatic talks between the United States and Iran against ongoing concerns over potential supply disruptions in the Middle East. While hopes for easing geopolitical tensions offered some relief, uncertainty surrounding the Strait of Hormuz continued to keep energy markets cautious.

U.S. West Texas Intermediate (WTI) crude futures declined 0.5% to $70.37 per barrel in early trading. Brent crude futures had not yet opened in the Asian session. Despite Monday’s rebound, both benchmark crude contracts remain more than 9% below their recent highs after retreating to levels seen before the escalation of the U.S.-Israel conflict involving Iran.

Market sentiment remained fragile following fresh military exchanges between Washington and Tehran over the weekend. Investors are closely monitoring developments after President Donald Trump announced that U.S. and Iranian officials are expected to hold peace talks in Doha later on Tuesday. However, Iran has not officially confirmed its participation, leaving uncertainty over whether the negotiations will move forward.

Adding to market concerns, Iranian Deputy Foreign Minister Kazem Gharibabadi said Tehran intends to continue pursuing plans to jointly oversee maritime traffic through the Strait of Hormuz even if Oman decides not to participate. The statement raised fresh questions about the future management of one of the world's most critical energy shipping routes.

Analysts at ANZ noted that increased Iranian influence over maritime traffic could delay the normalization of crude exports from the Persian Gulf. Continued security risks in the region also threaten shipping operations, potentially disrupting global oil supplies and maintaining upward pressure on energy prices.

The Strait of Hormuz remains one of the world's most strategically important waterways, handling roughly one-fifth of global crude oil and liquefied natural gas shipments. Any disruption to traffic through the passage can have significant implications for international energy markets, supply chains, and fuel prices.

Although crude prices have largely erased the gains triggered by the recent conflict, ANZ analysts believe tighter refined fuel markets continue to reflect underlying supply constraints. These conditions are expected to support refinery margins even if benchmark crude prices remain relatively subdued in the near term.

Investors are expected to remain focused on geopolitical developments, shipping conditions in the Strait of Hormuz, and the outcome of potential U.S.-Iran talks, as these factors are likely to determine the next direction for global oil prices.