Crude oil futures reversed early losses on Tuesday as traders priced in potential U.S. policy changes regarding Iran, with Brent crude settling 2.4% higher and WTI up 2.1%. Markets remain sensitive to geopolitical developments in the Middle East.
- Brent crude settled at $87.65 per barrel, up 2.4%.
- WTI crude rose to $84.32, a 2.1% increase.
- Iran exports ~2.3 million barrels per day via non-sanctioned routes.
- U.S. military presence increased in the Red Sea and Strait of Hormuz.
- Energy sector gains on S&P 500 rose 1.7%.
- Next Iran negotiations expected in mid-February.
Oil prices staged a strong recovery on Tuesday, erasing initial declines as traders focused on upcoming U.S. decisions concerning Iran’s nuclear and energy activities. Brent crude futures rose to $87.65 per barrel, while West Texas Intermediate (WTI) climbed to $84.32, both closing above previous session levels. The rebound followed minutes from the Federal Reserve’s latest meeting that hinted at potential delays in rate cuts, reinforcing expectations of sustained U.S. economic strength and energy demand. The market’s renewed optimism was driven by speculation that the United States may resume or modify sanctions waivers for Iranian oil exports. Iran currently exports approximately 2.3 million barrels per day through non-sanctioned channels, primarily to China and India. Any formal U.S. signal—whether through policy clarification or diplomatic engagement—could lead to a supply surge, potentially lowering global prices. Conversely, a hardline stance may trigger supply fears and further price spikes. Traders are also monitoring developments in the Red Sea and the Strait of Hormuz, where regional tensions remain elevated. A recent incident involving a commercial vessel in the Bab el-Mandeb Strait has heightened concerns over potential disruptions to shipping lanes that carry nearly 20% of global oil trade. The U.S. Navy has increased patrols in the region, underscoring the strategic importance of maritime security. The broader energy sector reacted positively, with energy stocks in the S&P 500 rising 1.7% and exploration and production firms such as ExxonMobil (XOM) and Chevron (CVX) posting gains. Analysts warn that volatility will likely persist until the U.S. administration clarifies its position on Iran, particularly ahead of the next round of international negotiations scheduled for mid-February.