Oil prices have been fluctuating following the latest US sanctions against Iran. Brent crude futures were up slightly at $92.16 a barrel, while U.S. West Texas Intermediate (WTI) crude saw a marginal gain to $85.12. Both benchmarks had previously dropped more than 2% as investors took profits after a two-week rally. Despite the recent dips, analysts note that the market's initial reaction to the US emphasizing economic pressure over military action helped calm fears of immediate physical supply disruptions.
The expanded US sanctions on Iran aim to sever the nation's financial lifelines, with Treasury Secretary Scott Bessent warning foreign countries to cut ties with Tehran or face exclusion from the US dollar-dominated financial system. However, the lack of specific targets or timelines initially led some market participants to view the economic pressure as less risky for oil supplies than a military escalation. This perception contributed to a temporary decline in prices, with Brent crude settling down 3.9% at $88.58 and WTI falling 3.1% to $82.36 at one point.
Concerns about supply disruptions persist, particularly around the Strait of Hormuz, a critical transit route for global oil. An oil tanker was struck by an unidentified projectile near Oman, damaging its engine room and disabling the vessel. This incident highlights the ongoing risks in the region, which has seen repeated attacks on commercial shipping throughout 2026. Iran has also vowed retaliation against the sanctions and threatened to disrupt oil exports through the Strait of Hormuz if countries cooperate with the new measures. Prior to the conflict, approximately one-fifth of global oil consumption passed through this strait.
Investment banks are providing varied forecasts. JPMorgan estimates that each additional month of disruption could add $7 to $8 a barrel to Brent prices, potentially reaching $114 a barrel if disruptions last three months. Goldman Sachs warned Brent could climb to $120 a barrel if Strait of Hormuz disruptions persist, though their base case for the fourth quarter and next year is lower, at $80 and $75 a barrel respectively. Analysts from KCM and Ritterbusch and Associates caution that despite the initial market reaction, Iran's ability to disrupt shipping maintains a residual premium in oil prices, and the market could swing sharply higher if military responses occur.
