Oil Prices Edge Lower as Strait of Hormuz Risks and Russia Sanctions Shape Market Outlook

Oil prices slipped slightly on Tuesday as traders weighed the risk of potential supply disruptions linked to heightened U.S.-Iran tensions, while also digesting fresh developments around sanctions on Russian crude exports.

Brent crude futures eased 0.2% to $68.88 a barrel by 08:00 GMT, while U.S. West Texas Intermediate (WTI) crude fell 0.3% to $64.16 a barrel. The modest pullback followed gains of more than 1% in the previous session.

Market attention remained firmly on the Strait of Hormuz after the U.S. Department of Transportation’s Maritime Administration issued guidance urging U.S.-flagged commercial vessels to keep clear of Iranian territorial waters and to verbally refuse any boarding requests from Iranian forces. Roughly one-fifth of global oil consumption passes through the strait, making it one of the world’s most critical energy chokepoints.

Any escalation between Washington and Tehran could pose a serious threat to global oil flows, particularly as Iran and several major OPEC producers — including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq — ship most of their crude through the waterway, primarily to Asian markets.

The guidance came despite a relatively conciliatory tone from Tehran. Iran’s foreign minister said last week that Oman-mediated nuclear talks with the United States had begun on a “good start” and were set to continue, offering some hope of de-escalation.

Beyond the Middle East, supply concerns were also shaped by Europe’s latest push to tighten sanctions on Russia. The European Union has proposed expanding restrictions to include ports in Georgia and Indonesia that handle Russian oil, marking the first time the bloc would target ports in third countries as part of its effort to curb Moscow’s energy revenues linked to the war in Ukraine.

Meanwhile, India — once a major buyer of Russian crude — appears to be diversifying its supply sources. Traders said Indian Oil Corp purchased around six million barrels of crude from West Africa and the Middle East, as New Delhi avoids Russian oil while seeking to advance a trade agreement with Washington.

Together, geopolitical tensions, evolving sanctions, and shifting trade flows continue to inject uncertainty into the oil market, keeping prices sensitive to headlines despite relatively muted moves in early trading.