Oil Eases After Monday's Rally Amid Iran Conflict and Houthi Blockade Concerns

Brent crude fell 0.9% to $88.40 per barrel, while WTI declined 0.9% to $82.50 on Tuesday after both benchmarks gained around 1% in the previous session, according to Reuters.

Key Factors Influencing Oil Prices

Monday's trading reflected shifting market sentiment as reports of a possible U.S.-Iran ceasefire proposal were followed by announcements from Yemen's Houthi movement regarding a naval blockade targeting Saudi Arabia.

Several factors continued to influence prices:

1. The Bab al-Mandeb Strait handles a significant share of global trade and oil shipments. Any disruption could require vessels to use longer alternative routes, according to ING analysts.
2. U.S. military operations involving Iranian-linked targets and ongoing regional tensions remained in focus, while diplomatic contacts reportedly continued.
3. ING analysts said recent price movements suggest markets remain uncertain about the potential impact of the blockade on global oil flows.

Market Context

Earlier expectations of easing geopolitical tensions had supported forecasts for increased oil supply. The U.S. and Iran signed a memorandum of understanding on June 18 aimed at reducing hostilities and reopening the Strait of Hormuz.

The U.S. Energy Information Administration (EIA) also projected in its July Short-Term Energy Outlook that Brent crude could average around $74 per barrel during the third quarter of 2026 under its baseline assumptions.

Recent developments have shifted market attention toward renewed geopolitical risks, while market participants remain cautious given previous episodes where regional tensions had limited long-term effects on global energy supplies.

Upcoming Data Releases

According to EIA data, U.S. commercial crude oil inventories totaled 409.7 million barrels as of July 10, around 6% below the five-year seasonal average.

The American Petroleum Institute (API) is scheduled to release weekly inventory estimates on Tuesday, followed by official EIA inventory data on Wednesday. These reports may provide additional insight into near-term supply conditions and market expectations.