Oil Slips 1% as Markets Weigh Fragile US-Iran Truce and Red Sea Shipping Data

Oil prices eased on Tuesday, with Brent and WTI both touching one-week lows earlier in the session, as markets continued assessing the pause in U.S. military strikes on Iran, which has raised expectations for a possible diplomatic resolution and reduced immediate concerns over Middle East energy supply disruptions.

Price Levels

1. Brent crude: $87.82 per barrel, down $0.54 (-0.6%) as of 00:46 GMT
2. WTI crude: $81.95 per barrel, down $0.66 (-0.8%)
3. Both benchmarks briefly declined by around 1% during the session before recovering part of their losses.

Diplomatic Developments Remain in Focus

President Trump said on Monday that the United States was engaged in "good talks" with Iran and saw an opportunity for a diplomatic resolution, while warning that military action could resume if negotiations fail. Iran also warned it would respond if hostilities restart.

IG market analyst Tony Sycamore said the temporary pause had "taken the heat out of prices" and eased concerns over Houthi attacks, while noting that the situation "remains highly fluid."

Shipping Flows Remain Below Recent Levels

According to Barclays, net exports of crude oil and refined products through the Strait of Hormuz averaged 2.9 million barrels per day during the week ending July 24, compared with 5.9 million barrels per day in the previous week.

Yemen's Saudi-backed government warned that Houthi forces were seeking to increase pressure around the Bab el-Mandeb Strait. Meanwhile, Marex analyst Edward Meir questioned whether the group had the capacity to sustain a prolonged disruption, citing the possibility of a Saudi response.

Demand Conditions Remain a Key Factor

Meir also said softer demand, particularly across Asia, has contributed to limited price gains despite ongoing supply concerns. Market participants continue monitoring regional demand trends alongside geopolitical developments.

This Week's Key Event

A preliminary Reuters poll suggests U.S. crude oil and gasoline inventories declined last week, while distillate inventories increased. The official U.S. Energy Information Administration (EIA) inventory report due later this week will provide another key data point for market participants, particularly as markets continue monitoring shipping activity through the Strait of Hormuz.