Oil prices plunge as US-Iran tensions ease, supply fears fade

Sharp decline in global benchmarks

International benchmark Brent crude plunged more than 6.5% to approximately $86.20 per barrel as of 8:20 p.m. GMT on Tuesday, extending a 2.4% decline from the previous trading session. US benchmark West Texas Intermediate (WTI) also retreated sharply, falling 5.5% to settle at $80.40 per barrel as selling pressure intensified across energy markets.

Diplomatic initiatives gain traction

Pakistan’s army chief visited Tehran on Tuesday in an effort to support diplomatic initiatives aimed at de-escalating tensions between Washington and Tehran, while Qatar stated it was continuing its mediation efforts between the parties. Reports indicating that the United States could soon return diplomats previously evacuated from the region reinforced market expectations that a wider military confrontation may be less imminent, according to trading sources.

US adopts phased sanctions approach

US Treasury Secretary Scott Bessent said countries currently trading with Iran would be given a deadline to wind down their commercial ties or face unilateral penalties, adopting a phased approach that eased concerns of immediate severe disruption to Iranian oil exports. The less aggressive measures proved softer than markets had anticipated, removing some of the risk premium that had supported prices in recent weeks.

Strait of Hormuz flows continue

Substantial volumes of crude oil continue to transit the Strait of Hormuz — a critical chokepoint for global energy shipments — although some cargoes are reportedly moving discreetly to avoid scrutiny. This continued flow through the waterway has alleviated immediate concerns over major supply shortages, adding further downward pressure on prices as traders assess regional export stability.