West Texas Intermediate (WTI) US Oil declined by 1.55% on Monday, trading around $85.00 as investors engaged in profit-taking ahead of the anticipated announcement of new US sanctions against Iran [1]. The retreat follows recent gains and comes as US Treasury Secretary Scott Bessent prepares to unveil what he describes as an 'unprecedented economic offensive' designed to isolate Iran and pressure its trading partners to reduce ties with Tehran [1]. The new measures are expected to target Iranian oil exports and foreign entities that continue business with Iran, raising concerns about a further reduction in Iranian supply at a time when the country's crude flows are already disrupted [1].
Iran has responded firmly to US threats, asserting that key partners such as China and Turkey are unlikely to sever relations and warning that it may halt oil exports from the Gulf if tensions escalate further [1]. Tehran has also cautioned that cooperation with Washington could be considered an 'act of war,' heightening geopolitical risks in the region [1]. The ongoing tensions around the Strait of Hormuz, a critical corridor for global oil supply, continue to fuel uncertainty and the risk of a supply shock, which is limiting the extent of WTI's decline despite the current profit-taking [1].
Strategists at BBH have highlighted that Secretary Bessent's initiative, scheduled for 7:00pm London (2:00pm New York), is being described as the 'single greatest financial offensive ever marshalled against an adversary,' targeting not only Iran but also the foreign networks that facilitate its oil trade [1]. BBH notes that China is the 'critical pressure point,' as it is Iran's largest trading partner and purchases approximately 90% of its oil exports, making Beijing's response pivotal for market risk sentiment [1].
MUFG analysts observe that while Iran has threatened to block all oil shipments through the Strait of Hormuz if the US proceeds, the oil market does not appear to fully believe Iran will follow through on this threat at this stage [1]. Investors are now awaiting the details and scope of the US sanctions to better assess their potential impact on Iranian exports and the broader global oil market balance [1].
CONCLUSION
WTI oil prices have retreated as markets await the details of a major new US sanctions package against Iran, with significant attention on China's potential response. While geopolitical risks remain elevated, especially around the Strait of Hormuz, the market's reaction so far suggests a wait-and-see approach until the full scope of US measures is revealed.