Oil Prices Decline as US Considers ‘D-Day’ Iran Sanctions; Focus on Strait of Hormuz Shipping Risks
Oil prices dropped over $1 per barrel on Monday as investors took profits ahead of an anticipated announcement from the U.S. regarding new sanctions against Iran. Brent crude fell by 1.90% to $92.60 a barrel, while WTI crude decreased by 1.96% to $85.35 per barrel as of 7:30 am IST. This decline follows a week where both benchmarks rose more than 5%, driven by a stalemate in U.S.-Iran peace talks that significantly reduced oil shipments through the Strait of Hormuz.
The Strait of Hormuz is a critical waterway, accounting for a fifth of the world’s oil supply. The upcoming U.S. sanctions have raised concerns about further disruptions to Middle Eastern oil supplies. U.S. Treasury Secretary Scott Bessent is set to hold a press conference at 2 pm EDT (1800 GMT) on Monday, where he has warned of “the toughest sanctions in history” against Iran. President Donald Trump has also threatened measures against countries that continue to trade with Tehran.
Iran has rejected the planned sanctions, with President Masoud Pezeshkian advocating for a diplomatic resolution. Reports indicate that offers of Iranian crude to Chinese buyers have decreased, leading to rising prices as U.S. blockades limit Tehran’s shipments. Concurrently, Iran has permitted several Iraqi oil tankers to transit through the Strait of Hormuz following requests from Baghdad.
U.S. Threatens Wider Economic Pressure
Washington has characterized the forthcoming sanctions as “the greatest financial offensive ever marshalled,” targeting Iran’s trading partners. In response, Iran has threatened to halt all oil exports from the Gulf if the economic pressure persists. Bessent is expected to detail these measures during Monday’s press conference, as the U.S. intensifies economic pressure on Iran, which has faced sanctions since the 1979 Islamic Revolution.
Bessent described the situation as “an economic D-Day” in an opinion piece published in the Financial Times. He has cautioned countries maintaining economic ties with Iran about the potential repercussions of these relationships, although he did not specify the exact measures Washington plans to implement. He urged China to cooperate with the U.S., noting that half of its oil imports from the Gulf region come from Iran. However, China’s embassy in Washington stated that “sanctions and pressure do not help resolve the problem,” advocating for diplomacy instead.
Iran Warns of Oil Export Halt
Iran has been preparing for the new sanctions and has issued strong warnings regarding its potential response. Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, indicated that Tehran could retaliate economically if the pressure continues. He stated, “If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf.” Rezaei further warned that any country’s support for the U.S. economic campaign against Iran would be viewed as an act of war.
Iran’s capability to disrupt energy supplies remains a significant concern for oil markets. The country possesses sufficient missile and drone capabilities to threaten Gulf neighbors and oil tankers in the Strait of Hormuz, where shipping has nearly come to a standstill. The status of Iran’s nuclear program remains uncertain, amid ongoing efforts by the U.S. and Israel to undermine it. Oil prices continue to experience volatility as the conflict unfolds, though the recent spike is considerably lower than the $126 per barrel level observed earlier in the conflict.
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