WTI retreats on US-Iran progress

West Texas Intermediate declined sharply on Monday and traded around $74.50, down 2.54% on the day. The US crude oil gave up earlier gains after testing highs near $78.00, as investors rapidly unwind the geopolitical risk premium that had supported prices in recent weeks.

Selling pressure intensifies following several encouraging developments regarding talks between Washington and Tehran.

Mediators from Qatar and Pakistan stated that a roadmap aimed at reaching a final agreement within 60 days had been established, paving the way for further technical negotiations. This development fuels hopes for a lasting de-escalation of tensions in the Middle East.

The market is also reacting to positive comments from both sides.

US Vice President JD Vance said that mechanisms had been put in place to ensure the Strait of Hormuz remains open and to prevent further regional escalation. On the Iranian side, Foreign Minister Abbas Araghchi described the talks as making “great progress,” highlighting advances related to oil and petrochemical exports.

The Strait’s importance for energy markets remains significant, as roughly 20% of world energy supplies pass through the strategic waterway. Concerns over a potential closure had provided strong support to oil prices in recent days, while recent announcements are now reducing that risk in the eyes of investors.

However, the geopolitical backdrop remains fragile. Initial optimism was tempered by threats from President Donald Trump to intensify strikes against Iran if Tehran-backed groups continued their actions in Lebanon. According to media reports, those comments prompted Iranian negotiators to temporarily suspend talks in Switzerland.

Despite this ongoing uncertainty, the market appears to be favouring, for now, a scenario in which oil flows remain uninterrupted and relations between the two countries gradually normalise. This outlook is weighing on crude oil prices, as traders reassess the likelihood of supply disruptions in the market.

(Source: OANDA)