Oil prices fell Tuesday after Iran announced it had reached a “general agreement” with the US on a potential nuclear deal that would lift some sanctions on the Iranian regime.
Futures on Brent crude (BZ=F), the international pricing benchmark, fell by 0.6% to trade below $67.50. Those on the US pricing benchmark West Texas Intermediate (WTI) crude (CL=F), lost 0.9% to change hands around $62.25.
In comments to state TV, Iranian foreign minister Abbas Araghchi said, “We were able to reach a general agreement on a set of guiding principles, based on which we will proceed from now on and move toward drafting a potential agreement.”
Iran’s leadership has spent the past month in talks with US Special Envoy Steve Witkoff. The news is seen as lowering the risk of a military conflict between the two countries, which would apply an immediate risk premium to oil prices.
Iran largely controls the Strait of Hormuz, a key shipping chokepoint that sees roughly 20 million barrels of oil traverse its waters every day. Any moves to restrict access to the strait, or attacks against infrastructure in the region, would push oil prices much higher as buyers priced in longer and slower shipping routes and a drop-off in Middle Eastern supply.
Earlier on Tuesday, Iranian leadership said Tehran would partially close the strait for several hours due to military drills, according to Bloomberg. The move comes as the US has steadily built up its naval armament in the region, sending a second aircraft carrier to the region late last week. The US Maritime Authority advised ship captains in early February to avoid Iran’s territorial waters if possible, for fear of potential interference or forcible boardings.
Yet despite seeming progress toward a deal the X account for the Ayatollah Ali Khamenei, Iran’s supreme leader, posted several comments disparaging US involvement in Iran’s energy industry.
“The Americans say, ‘Let’s negotiate over your nuclear energy, and the result of the negotiation is supposed to be that you do not have this energy!'” the X account posted early Tuesday morning.
“If that’s the case, there is no room for negotiation; but if negotiations are truly to take place, determining the outcome of the negotiations in advance is a wrong and foolish act.”