Oil slips as markets await fresh US sanctions on Iran

Oil prices retreated by more than a dollar a barrel on Monday, as investors locked in profits ahead of an anticipated US announcement on additional sanctions against Iran. The move comes amid heightened uncertainty over Middle East supply routes.

Brent crude futures were down $1.22, or 1.29%, to $93.17 a barrel, while US West Texas Intermediate crude slipped $1.20, or 1.38%, to $85.86. Both benchmarks had posted weekly gains of over 5% last week, driven by stalled US-Iran peace talks that have raised concerns over shipments through the Strait of Hormuz, a passage that handles roughly a fifth of global supply.

US Treasury Secretary Scott Bessent is scheduled to hold a press conference later on Monday, having previously threatened to impose what he called "the toughest sanctions in history" on Iran. President Donald Trump has also warned of penalties against Iran's trading partners.

Analysts remain divided on the effectiveness of such measures. Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, noted that if the US policy succeeds in isolating Iran economically, Tehran's potential for a violent response becomes a growing risk for energy markets.

Iran has condemned the planned sanctions, even as President Masoud Pezeshkian called for a diplomatic solution. Market watchers suggest a split within the Iranian leadership between pragmatists seeking de-escalation and hardliners favouring confrontation. "I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand," said Tony Sycamore, an analyst at IG markets.

Trade sources indicate that offers of Iranian crude to Chinese buyers have already declined, with prices jumping as the US blockade curtails Tehran's shipments. In a separate development, Iran has granted permission for several Iraqi oil tankers to pass through the Strait of Hormuz, following repeated requests from Baghdad, according to Iran's state news agency IRNA.