Oil prices were mixed in Tuesday trading as fresh United States military operations in southern Iran cast doubt on a potential diplomatic breakthrough that could reopen the Strait of Hormuz and ease pressure on global energy markets. Futures on Brent crude, the international benchmark, were volatile after closing just above $100 per barrel on Friday, while WTI crude ended last week above $96.
“Both the Iranian government and the U.S. administration are walking a tightrope, trying to negotiate a deal to end the war while avoiding a loss of domestic support,” said Hamidreza Azizi, an Iran expert at the German Institute for International and Security Affairs (SWP-Berlin). “I do not think we should take the two sides’ public messaging at face value, because both are speaking to different audiences and are primarily concerned with managing domestic politics.”
The mixed signals have whipsawed markets. A potential deal, which officials suggest could be approved within days, would reportedly extend a fragile ceasefire by 60 days and begin the process of reopening the Strait of Hormuz. However, the new US military action, confirmed in a brief statement, directly contradicts the diplomatic push and reminds investors of the high geopolitical risk premium attached to crude.
At stake is the stability of the global economy, which has been jolted by the energy crisis sparked by the US-Israel bombardment of Iran on February 28. An Iranian official warned Washington could face “$6-gasoline” if it continues its aggressive posture. The war has strained the Trump administration’s approval ratings and prompted Congress to move toward limiting the president’s war powers.
The Diplomatic Front
Over the weekend, President Donald Trump raised expectations for a deal, stating on Truth Social that an agreement was “largely negotiated.” He later tempered those comments, insisting the US would not be “rushed into a deal” and that the naval blockade of Iranian ports would remain in “full force and effect until an agreement is reached, certified, and signed.”
Secretary of State Marco Rubio, speaking in India, confirmed a “pretty solid thing on the table” that would see Iran reopen the strait and enter time-limited negotiations on its nuclear program. In exchange, Tehran is demanding the lifting of sanctions and access to tens of billions of dollars in frozen oil revenues.
Details of the emerging agreement, reported by The Associated Press, suggest a phased approach. The strait would gradually reopen as the US ends its blockade, and Iran would be allowed to sell oil through sanctions waivers. Critically, the deal would require Iran to give up its stockpile of highly enriched uranium, a key demand from Washington. One official noted the material would likely be diluted or transferred to a third country, possibly Russia, over a 60-day period.
Defiance and Distrust
Iranian officials have responded with a mix of cautious optimism and public defiance. Ebrahim Rezaei, spokesperson for Iran’s National Security and Foreign Policy Commission, said on X that the US could “continue bluffing” if it wanted high gas prices, stating that “Iran does not bow to force or threats.”
Tehran’s public stance is that the current talks are focused on ending the war, not its nuclear program, which it has always insisted is for peaceful purposes. Foreign Ministry spokesman Esmaeil Baghaei said the nuclear issue would be reviewed during the 60-day talks in exchange for a full lifting of sanctions and the release of frozen assets.
This deep-seated distrust stems from the US withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA) under President Trump. Iranian officials remain wary of committing to a new agreement, with the Tasnim news agency reporting that Washington continues to block key parts of a deal, including access to its funds.
This article is for informational purposes only and does not constitute investment advice.
