Oil prices fell by around 1% on Tuesday, reversing gains from the previous session and heading for a sharp monthly decline. Market attention is now focused on the possibility of renewed U.S.-Iran talks in Doha, as an interim ceasefire remains fragile.

As of 06:53 GMT, Brent crude futures for August delivery fell 1%, or 75 cents, to $72.40 per barrel. This level is around $20, or 22%, lower than last month’s closing price.

The more actively traded September Brent contract declined 0.6% to $73.46 per barrel. Meanwhile, U.S. West Texas Intermediate crude for August delivery fell 0.8%, or 57 cents, to $70.18 per barrel. WTI is on track for a decline of about $17, or 19%, from its May 29 close.

Oil Prices Move Close to Pre-War Levels

Both Brent and WTI are now trading near pre-war levels. This suggests that the market is partly pricing in the possibility of easing tensions in the Middle East.

Investors are hoping that discussions in Doha could deliver a positive signal, although shipping flows through the Strait of Hormuz have not yet fully returned to normal.

According to analysts, the market remains cautiously optimistic: there is hope for de-escalation, but not yet enough evidence to fully remove geopolitical risk from pricing.

The Strait of Hormuz Remains a Key Risk Point

The Strait of Hormuz remains a critical factor for global energy markets. Iran has said that Iranian and Omani experts will begin discussions in the coming days on redefining shipping routes through the area.

However, Iran also warned that it may obstruct vessels operating outside designated routes. This shows that the risk of disruption to energy flows has not completely disappeared.

At the same time, Iran’s Foreign Ministry said there would be no negotiation meetings at any level with the U.S. side in the coming days. These mixed diplomatic signals make the outlook for talks more difficult to predict.

The Ceasefire Agreement Remains Fragile

The June 17 agreement to pause fighting is still viewed as fragile. The four-month conflict has disrupted global oil flows through the Strait of Hormuz and added political pressure on the United States.

U.S. President Donald Trump also left the importance of the Doha meeting open-ended, suggesting that markets still need clearer signals before pricing in a more durable de-escalation scenario.

China Demand Adds Further Pressure

Beyond geopolitical factors, demand from China remains another concern for analysts. As the world’s largest crude importer, any sign of weaker Chinese buying can put additional pressure on oil prices.

For now, the market is still waiting for stronger evidence of a meaningful recovery in Chinese crude demand. Without clearer signs, the potential for a strong rebound in oil prices remains limited.

Energy Flows Continue Despite Risks

Shipping data showed that Middle East producers continue to load oil and liquefied natural gas despite fresh attacks on vessels in the Strait of Hormuz and renewed tensions between the U.S. and Iran in recent days.

Notably, traffic last week reached its highest level since the conflict began at the end of February. This helped ease some concerns about a severe disruption to energy supply.

Conclusion

Oil prices are heading for a sharp monthly decline, with Brent down around 22% and WTI lower by about 19% compared with the end of last month. The main driver is growing market expectation that U.S.-Iran tensions may ease, while energy flows through the Middle East have not been completely disrupted.

However, risks remain significant. The Strait of Hormuz continues to be a sensitive chokepoint, the outlook for U.S.-Iran talks is uncertain, and Chinese demand has yet to show a strong recovery.

In the short term, oil prices are likely to remain highly sensitive to signals from Doha, developments in the Strait of Hormuz, and demand prospects from major economies.

Source: Reuters