Oil prices fell sharply on Tuesday, with crude slipping to around USD 95 a barrel, after reports that Iran has proposed suspending key nuclear activities for up to five years, raising hopes of reduced geopolitical tensions and potential easing of supply constraints. The move weighed on energy markets, pushing both WTI and Brent benchmarks lower as traders reassessed risk premiums tied to the Middle East. However, Trump administration had reportedly rejected the proposal, insisting on 20 years of suspension plan, Al Jazeera reported citing two senior Iranian officials and one US official.
The oil prices had climbed above USD 100 per barrel on Monday after a two-day talk held between the U.S. and Iran in Islamabad failed. Both countries did not reach an agreement and shortly after the talks concluded, the U.S. President Donald Trump said that the US Navy will “immediately” begin the blockade of the Strait of Hormuz and asserted that “No one paying illegal toll will have safe passage”, he also added that the U.S. Navy will soon begin destroying the mines laid in the Strait by Iran. Trump also called Iran’s actions “world extortion.”
In response to Trump’s comments and subsequent failure of talks between both nations, Oil price jumped 7 per cent on Monday as it once again crossed the USD 100 dollar per barrel mark after cooling nearly 15 per cent to trade lower following a 14-day ceasefire announcement.
Any shock related to the Strait of Hormuz puts direct pressure on oil as the Strait is a crucial maritime route connecting the Persian Gulf to the Gulf of Oman, facilitating approximately 20 per cent of global oil shipments.
On March 9, Brent crude surged over 27 per cent to trade at a multi-year high of USD 119 a barrel amid escalating Middle East tensions. The prices later dropped significantly after the announcement of coordinated oil reserve release by major G7 economies. The oil price, although at a multi-year high, was still lower than its all-time high of USD 147 per barrel seen in July, 2008. The recent hike was also lower than USD 130 per barrel price that was hit in 2022 during the Russia-Ukraine crisis.
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