Oil prices fall as US-Iran tensions ease

WEB DESK: Global oil prices continued their downward slide on Tuesday, extending losses for a second straight day as signs of possible de-escalation in US-Iran tensions reduced geopolitical risk premiums, while a firmer US dollar added further pressure on the commodity.

According to Reuters, Brent crude futures fell 34 cents, or 0.5 per cent, to $65.96 per barrel by 06:23 GMT, according to market data. US West Texas Intermediate (WTI) crude was trading at $61.81 a barrel, down 32 cents, or 0.5pc. This followed a sharper decline of more than four percent on Monday, marking one of the steepest single-session drops in recent months.

The easing came after US President Donald Trump said Iran was “seriously talking” with Washington, signaling potential progress in reducing hostilities with the OPEC member. Officials from both sides indicated that nuclear talks are set to resume on Friday in Turkey. Iranian President Masoud Pezeshkian said Tehran was pursuing dialogue to protect national interests, provided threats and unreasonable demands were avoided. Trump also noted ongoing US naval movements near Iran, warning of consequences if no agreement materializes.

Market participants viewed these developments as reducing the likelihood of immediate supply disruptions from the region, prompting traders to unwind part of the risk premium that had supported prices in recent weeks.

Adding to the pressure, the US dollar index hovered near its highest level in over a week, making dollar-denominated crude more expensive for buyers using other currencies and dampening demand. The dollar’s strength followed President Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, boosting expectations of a tighter monetary policy stance.

Analysts also pointed to other factors weighing on prices, including a recent US-India trade deal that could redirect oil flows, potentially increasing floating Russian crude supplies if India shifts its purchase, and expectations of choppy, range-bound trading through February.

OANDA senior market analyst Kelvin Wong said volatile oil movements over the past four weeks have been heavily influenced by geopolitical risks linked to the current US administration’s foreign policy, particularly shifting signals toward Iran.

Meanwhile, ING analysts cited the dollar’s recovery as a key downward driver, while Phillip Nova analyst Priyanka Sachdeva warned that oil prices are likely to remain highly sensitive to headlines and macroeconomic signals in the coming month, with downside risks prevailing.

For Pakistan, where oil imports play a major role in the economy and fuel pricing, these developments could provide short-term relief at the pump if the trend continues though volatility remains elevated amid persistent global uncertainties.