Crude bounces back above $92 following US financial threat to Iran

Oil prices rebounded on Tuesday, August 25, following a more than 2% drop in the prior session, as market participants evaluated the potential impact of newly announced U.S. sanctions against Iran alongside persistent threats to shipping in the Middle East.

By 0330 GMT, Brent crude futures rose 27 cents, or 0.3%, to $92.44 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 37 cents, or 0.4%, to trade at $85.38. Both benchmark contracts had settled lower on Monday, with U.S. crude touching a one-week low as traders took profits following a two-week rally.

"The market seems largely unfazed by Washington's push for tighter economic pressure on Iran, with traders treating the U.S. effort to nudge partners away from Iranian trade as marginal rather than market-moving," ING commodity strategists wrote in a note on Tuesday.

On Monday, U.S. Treasury Secretary Scott Bessent outlined an expansion of economic sanctions designed to sever Iran's financial lifelines and bring an end to the ongoing conflict. Bessent warned foreign nations that they must cut business ties with Tehran or face exclusion from the U.S. dollar-dominated global financial system. However, he stopped short of naming specific countries or setting an exact timeline for penalties, stating that target entities would be granted time to comply with the directive.

The emphasis on financial enforcement helped calm immediate supply fears. Although U.S. Defense Secretary Pete Hegseth stated Monday that Washington would not rule out military action against Iran, analysts noted that the shift toward economic coercion reduced immediate concerns regarding physical supply disruptions caused by the war.

"Markets appear to be pricing economic pressure as a lower-risk path for physical supply than kinetic action, which is why the initial reaction was for oil to move lower rather than spike higher," said Tim Waterer, chief market analyst at KCM. He cautioned, however, that "Iran still retains the ability to respond by disrupting shipping, which continues to keep a residual premium in the oil price."

Underscoring those risks, the United Kingdom Maritime Trade Operations (UKMTO) reported Tuesday that an oil tanker was disabled by an unidentified projectile approximately 9 nautical miles (16.7 km) northeast of Ash Shishah, Oman.

Tehran continues to assert authority over the strategic Strait of Hormuz, a key maritime choke point that handled roughly 20% of global daily oil consumption prior to the outbreak of hostilities in February. On Monday, Iranian authorities published a list of 45 tankers accused of violating transit regulations in the strait, threatening targeted action including the seizure of their oil cargoes.

The conflict involving the U.S., Israel, and Iran — which erupted on February 28 — has severely disrupted energy supplies, forcing major consuming nations to draw down emergency reserves. On Monday, the U.S. Department of Energy revealed that inventory in the Strategic Petroleum Reserve (SPR) dropped by approximately 3.7 million barrels last week to 289.7 million barrels, hitting its lowest level since November 1982.

By Tamilla Hasanova