Brent crude retreated to around $86 a barrel after briefly climbing to $90 earlier in the day, as reports of renewed diplomatic efforts between the US and Iran eased supply concerns.
Brent crude futures were down 2.1% at $86.26 a barrel after giving up a large part of the day’s rally.
According to Iran’s ISNA news agency, Pakistan and Qatar have proposed that Washington and Tehran return to the negotiating table in an effort to revive diplomacy.
ISNA also reported that the mediators have suggested both Iran and the US return to their pre-July 9 positions, signalling a potential path toward de-escalation.
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The reports prompted traders to trim the geopolitical risk premium that had pushed crude prices as high as $90 a barrel earlier in the session, with markets closely tracking developments in the Middle East.
Earlier in the day, Brent crude for September settlement climbed as much as 4% before trading 2.7% higher at $90.50 a barrel, while U.S. West Texas Intermediate for August delivery gained 2.4% to $84.49 a barrel, after renewed military action between the United States and Iran fuelled concerns over crude supplies moving through the Strait of Hormuz.
The rally followed another escalation in the conflict over the weekend, with the United States and Iran exchanging fresh attacks. Tehran said the ceasefire between the two countries had effectively broken down, raising fears that disruptions to one of the world’s busiest oil shipping routes could intensify.
The U.S. Central Command said American forces launched a ninth consecutive night of strikes against Iranian targets, describing the operation as an effort to further weaken military capabilities used in attacks on commercial vessels and civilian shipping. Kuwait also said it intercepted Iranian drones during the weekend.
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Oil prices later surrendered part of their gains after comments from an Iranian foreign ministry spokesperson raised the possibility of renewed talks with the United States based on Iran’s national interests, prompting investors to reassess the immediate geopolitical risk.
Despite the pullback, tensions remained elevated. Iran said two oil tankers had been struck and disabled, while the Islamic Revolutionary Guards Corps (IRGC) claimed responsibility for attacks targeting U.S. aircraft in Jordan and American military assets in Kuwait and Syria. Authorities in Bahrain also confirmed that emergency warning sirens had sounded on Monday morning.
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