Oil prices surged on Tuesday as the U.S. government’s implementation of new sanctions aimed at Iran’s oil industry ignited fresh concerns about supply disruptions. Brent Oil Futures climbed 0.6 percent to $75.19 per barrel as of 21:14 ET (02:14 GMT), while West Texas Intermediate (WTI) crude futures increased by 0.7 percent to $70.92 per barrel.
U.S. sanctions on Iran spark supply concerns
The sanctions, unveiled by the Treasury Department, are designed to heighten economic pressure on Iran by targeting over 30 entities and individuals linked to the nation’s oil supply chain, including brokers and tanker operators located in the United Arab Emirates, Hong Kong, and China. This initiative is part of President Donald Trump’s “maximum pressure” strategy, explicitly aimed at curtailing Iran’s petroleum exports, especially to major consumers like China.
Treasury Secretary Scott Bessent underscored the administration’s dedication to employing all available tools to disrupt Iran’s oil supply chain, cautioning that significant sanctions risks await those engaging with Iranian oil.
In light of these developments, oil futures saw modest increases on Monday. The market’s response mirrored concerns regarding potential foreign supply constraints arising from the newly imposed sanctions on Iran.
Read more: Oil prices fall 0.3 percent to $74.24 amid weak U.S. economic data
Markets uncertain amid complex supply-demand scenario
Despite the upward pressure instigated by the sanctions, the broader outlook for oil prices remains ambiguous. Possible cease-fire agreements between Russia-Ukraine and Israel-Hamas might mitigate some market anxieties, potentially counteracting price escalations.
Media reports indicate that OPEC and its allies, collectively referred to as OPEC+, are considering further delays in augmenting oil production owing to persistently weak demand and increasing output from non-member nations. Initially, the group intended to ease production cuts beginning in April 2025, but this timeline has been postponed several times, with the latest adjustment shifting the start to April 2025.
These anticipated production delays are likely to bolster oil prices by constraining supply. However, forecasts suggest that the global oil market is set to revert to a surplus in 2025, even with OPEC+ extending supply cuts, which could result in decreasing prices in the upcoming year. Additionally, the resumption of Iraqi oil exports from the Kurdish region may further affect supply dynamics.
