Oil prices fell about 5% to a two-week low on Tuesday on expectations the ceasefire between Israel and Iran will reduce the risk of oil supply disruptions in the Middle East.
That ceasefire, however, was on shaky ground with U.S. President Donald Trump accusing both Israel and Iran of violating it just hours after it was announced.
Brent crude futures fell $3.29, or 4.6%, to $68.19 a barrel at 10:43 EDT (1443 GMT), while U.S. West Texas Intermediate (WTI) crude fell $3.20, or 4.7%, to $65.31.
That put both contracts on track for their lowest closes since June 10, before Israel launched a surprise attack on key Iranian military and nuclear facilities on June 13.
Explosions rang out in Tehran on Tuesday despite Trump saying Israel had called airstrikes off at his command to preserve an hours-old ceasefire.
“I didn’t like the fact that Israel unloaded right after we made the deal. They didn’t have to unload and I didn’t like the fact that the retaliation was very strong,” Trump told reporters.
Prices also fell as Trump posted on social media platform Truth Social that China, the world’s second biggest economy behind the U.S., can now continue to purchase oil from Iran.
Israeli Defence Minister Israel Katz had said that he had ordered its military to mount new strikes on targets in Tehran in response to what he said were Iranian missiles fired in a “blatant violation” of the ceasefire.
Iran denied launching any missiles.
The 12-day war has triggered high volatility in oil prices, with Brent crude trading in an $11.86 range on Monday, its widest since July 2022.
Both oil contracts settled more than 7% down in the previous session, having rallied to five-month highs after the U.S. attacked Iran’s nuclear facilities over the weekend.
“Oil prices fell sharply, as U.S. strikes on Iranian nuclear facilities failed to trigger a wider conflict that could pose a threat to regional supplies,” Barclays, a bank, said in a note on Tuesday.
Brent crude oil futures touched five-months highs on Sunday evening after U.S. strikes on Iran over the weekend, but ended the session over 7% lower as the market viewed Iran’s retaliatory attack on a U.S. base in Qatar as de-escalatory.
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The direct U.S. involvement in the war also focused investors on the Strait of Hormuz, a narrow waterway between Iran and Oman, through which between 18 million and 19 million barrels per day of crude oil and fuels flow, accounting for nearly a fifth of global consumption.
In other supply news, Kazakhstan’s state energy company KazMunayGaz raised its forecast for oil output at the Chevron-led Tengiz oilfield, the country’s largest, to 35.7 million metric tons in 2025 from 34.8 million tons expected previously, as it boosts output.
Kazakhstan is a member of the OPEC+ group of countries that includes the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia and Kazakhstan.
“Prior to the outbreak of hostilities between Israel and Iran, we had been suggesting a bearish stance mainly due to increased OPEC+ production that has prompted ample crude supplies, an evolving dynamic that has intersected with expected demand deterioration largely due to the Trump tariffs,” analysts at energy advisory firm Ritterbusch and Associates said in a note.
