Oil prices fell more than 2% on Monday, ending a recent rally as investors locked in profits and assessed Washington's announcement of a new economic pressure campaign against Iran.
Brent crude dropped $2.22, or 2.35%, to close at $92.17 a barrel, while US benchmark West Texas Intermediate fell $2.05, also around 2.35%, to settle at $85.01. It was Brent's biggest one-day decline in roughly three weeks.
The pullback followed two consecutive weeks of gains. In the past week alone, Brent had risen 6.39% and WTI 5.66%, driven by a standstill in US-Iran contacts and restricted flows through the Strait of Hormuz, which had stoked fears over global supply.
US Sanctions Target Five Sectors
The session was dominated by announcements from US Treasury Secretary Scott Bessent, who unveiled a new campaign aimed at further isolating Iran from the global economy.
Washington threatened broader sanctions on countries and businesses that continue trading with Tehran, focusing on five key sectors: digital assets, gold, technology, aviation and shipping. Separately, new sanctions were imposed on roughly 60 people, entities and vessels linked to Iran.
However, the Trump administration did not immediately trigger the sweeping secondary sanctions that could hit countries and major financial institutions with economic ties to Tehran.
Bessent said the United States was initially choosing to give those involved a clearly defined window to scale back their dealings with Iran, warning that Washington could move quickly after that. Major Chinese entities were absent from the first wave of measures, despite China being the largest buyer of Iranian oil.
The move eased some of the geopolitical premium that had built into prices in recent days, as the immediate measures proved milder than the scenario of an immediate, sweeping rollout of secondary sanctions that markets had feared.
Strait of Hormuz Remains Key Risk
Despite the fall in prices, supply risks remain elevated because of the situation in the Strait of Hormuz, through which roughly a fifth of global oil flows passed before the war.
According to shipping data cited by Reuters, fewer than 20 commercial vessels crossed the Strait of Hormuz over the weekend, as traffic restrictions continue to affect the key energy corridor.
Oil is still moving through the area despite the difficulties. TotalEnergies chief executive Patrick Pouyanné said the company is profitably shipping cargoes through the Strait, as the large discounts offered by Gulf producers outweigh higher transport costs.
Iraq's state oil marketer SOMO and Qatar's state energy company QatarEnergy have also offered crude cargoes for loading within the Strait.
Why Brent Isn't at $120-150
The continuation of these flows is seen as one of the main reasons prices have not spiked much higher.
SEB analyst Bjarne Schieldrop said the fact that Brent is trading near $90 rather than in the $120 to $150 range is a sign that significant volumes of oil are still reaching the market from the Strait of Hormuz and the Persian Gulf.
The critical turning point, he said, would come if Iran attempted to fully close the Strait using missiles and drones.
Morgan Stanley has nonetheless revised its Brent forecasts higher, estimating the price could peak at $100 a barrel in the fourth quarter.
Meanwhile, International Energy Agency executive director Fatih Birol said a second release from strategic oil reserves is not currently being considered.
After Monday's close, the market's central question has shifted from Washington's announcements to their practical consequences: how quickly secondary sanctions will be applied, which countries could be targeted, and above all how Tehran will respond and what that means for flows through the Strait of Hormuz.
