Brent crude edged 2.5% higher on Tuesday and appears to have stabilised around $100 per barrel, as negotiations between the United States and Iran hit a roadblock. The price of West Texas Intermediate (WTI), however, dropped over 4% to trade near $92.6 per barrel, reflecting diverging market expectations.
Oil prices had been declining since last Wednesday, when a framework for a peace deal—or at least a more comprehensive ceasefire—between Washington and Tehran seemed close to agreement. But those hopes have faded after Iran accused the US of breaching the current ceasefire following what Washington described as defensive strikes in the south of the country.
Iran's foreign ministry stated that the US attacks in Hormozgan province, where Iranian media reported explosions early Tuesday, amounted to a "serious violation" of the fragile ceasefire that has been in effect for nearly seven weeks. Meanwhile, US Secretary of State Marco Rubio said negotiations aimed at ending the conflict could require "a few days" to reach an agreement.
On Monday, President Donald Trump reiterated nuclear demands in a social media post, as tensions continue to surround the fundamental aspects of a possible agreement. Investors appear to have mixed reactions, with some markets pricing in a lower probability that a deal is imminent.
European Markets Slide
In Europe, the Euro Stoxx 50 fell more than 0.7%, while the broader pan-European Stoxx 600 traded around 1% lower as Tuesday's session approached its close. The UK's FTSE 100, Germany's DAX 30, France's CAC 40, Italy's FTSE MIB, the Netherlands' AEX, and Switzerland's CH20 all dropped between 0.1% and 0.7%.
Across Asia, Japan's Nikkei 225 and Taiwan's TAIEX closed flat, but South Korea's KOSPI jumped 2.5%, driven primarily by sustained demand for AI-related equities. US markets, however, appeared completely decoupled from other indices and the broader situation: not only did WTI prices continue to fall on Tuesday, but the S&P 500 also opened 0.6% higher.
The divergence underscores the uncertainty surrounding the energy market and the global economy. The G7 finance talks in Paris are expected to address the energy shock and potential sanctions on Russia, adding another layer of complexity to the geopolitical landscape.
Strait of Hormuz Remains a Flashpoint
Both the US and Iran had previously signalled progress toward a memorandum of understanding that could end the conflict and resume maritime traffic through the blocked Strait of Hormuz, while allowing negotiators a 60-day window to tackle more complicated matters such as Iran's nuclear activities and supplies. In his latest remarks, Secretary Rubio stated that the Strait of Hormuz must remain accessible "one way or the other," as traffic through the chokepoint has dropped sharply, with only a few dozen ships currently using the route each day, compared with the usual 125 to 140 vessels.
Iran has continued to permit limited shipping, prioritising vessels connected to allied or friendly nations and arranging passage through state-to-state agreements. Continuous reports of attacks in the Strait of Hormuz underscore how far the global economy remains from normalisation of energy flows and other supplies.
On Tuesday, the United Kingdom Maritime Trade Operations (UKMTO) reported that a tanker experienced an external blast near the waterline on its port side, about 60 nautical miles from Muscat, the capital of Oman. The agency said the tanker and all crew members were unharmed, although a quantity of bunker fuel spilled into the sea.
The ongoing tensions in the Gulf have broader implications for European energy security. As Saxony Premier Kretschmer has argued, resuming Russian gas talks could alleviate some pressure, but such moves remain politically contentious within the EU.
