Crude oil prices eased on Tuesday following reports claiming that a draft agreement aimed at ending hostilities has been sent to the United States for review, which it found to be preliminarily acceptable. According to Sky News Arabia, the proposed deal has received preliminary acceptance from the US administration, potentially marking progress in negotiations focused on de-escalation and regional stability. Global benchmark Brent crude fell 3% to an intraday low of $90.74 per barrel, while West Texas Intermediate slumped 4% to a low of $87.45 per barrel. As of 8 p.m. IST, Brent pared some losses to trade 3.10% lower at $91.26 and WTI traded near day's low. While details of the draft were not immediately disclosed, the development comes amid intensified international attempts to prevent further escalation in the region.
Iranian Foreign Ministry spokesman Esmail Baghaei issued a stark warning on Monday, stating that the United States is "responsible for the consequences of any escalation" in the West Asia region caused by Israel. As reported by Business Standard, Baghaei made the comment in a briefing with journalists in Tehran, emphasizing that "No one believes that the Israeli regime would take any action without coordination with the United States." "The United States bears responsibility for the Israeli regime's aggression, and it will also be responsible for the consequences of any escalation in tensions," Baghaei declared. This represents a significant escalation in Iran's rhetoric, directly linking US policy to Israeli military actions and warning of potential retaliation. Iran and Israel said they had halted attacks on each other after an appeal from US President Donald Trump that they immediately "stop 'shooting'", though Tehran said it would resume strikes if Israel continued to hit Hezbollah in Lebanon, as reported by The Hindu BusinessLine. Israeli Prime Minister Benjamin Netanyahu said in a video statement carried by Israeli television that Israel would respond with force if Iran attacked again, while Trump told Axios in an interview published on Monday that he warned Netanyahu that he might find himself fighting alone if he went back to war with Iran.
Attention is also turning to the Strait of Hormuz, through which roughly one-fifth of global oil supplies passed before the conflict escalated earlier this year. As per CNBC TV18, reopening the strategic waterway remains one of Washington's key demands in ongoing peace talks with Tehran. On Monday, US forces disabled an unladen oil tanker in the Gulf of Oman after it attempted to sail to an Iranian port in violation of the ongoing blockade against Iran, the US military said, as reported by The Hindu BusinessLine. The broader conflict has largely remained paused since the U.S. and Israel suspended attacks on Iran in early April, but Tehran has continued to restrict most shipping activity through the Strait of Hormuz. Negotiations have been particularly complex due to strategic issues surrounding critical maritime routes, including the Strait of Hormuz, a vital corridor for global energy supplies and international trade. Any agreement would likely involve security guarantees, measures to reduce military tensions, and mechanisms to ensure freedom of navigation through key waterways.
In response to the escalating tensions, the Organization of the Petroleum Exporting Countries (OPEC) has intervened to address the tightening supply outlook, with member nations collectively agreeing to increase oil output quotas. According to Goodreturns, the expansion will add 188,000 barrels per day to global supplies, with the adjustment set to take effect starting in July. While this move represents a significant policy shift, it remains to be seen whether the additional output will be sufficient to mitigate the inflationary pressures created by the ongoing geopolitical turmoil and the persistent threat of supply chain interruptions. The collapse of the truce diminishes the likelihood of a long-term US-Iran diplomatic breakthrough, with tensions spiking further when Iran fired missiles at Israel in direct retaliation for a targeted strike in Beirut.
Trump said late Monday that negotiations with Tehran were continuing and reiterated his view that oil prices would decline once the conflict ends. However, as reported by NDTV Profit, analysts caution that even a formal peace agreement would not immediately restore energy flows. Mines in the Strait of Hormuz would need to be cleared, damaged energy infrastructure repaired and oil fields brought back online, a process that could take months. The 2026 oil shock is testing emerging economies with fuel pricing, exchange-rate flexibility and inflation control set to determine growth outcomes, as EMs and developing economies now represent 43% of global nominal GDP, with of the 24 countries in the MSCI EM index, 15 are energy importers, adding up to 29% of world GDP. "The key question is whether current de-escalation efforts can finally translate into a longer-lasting resolution, or if we're simply in another temporary lull," Waterer said, as reported by The Hindu BusinessLine. "While this helped stop the situation snowballing, the geopolitical backdrop remains tense, and a lasting peace deal remains elusive," added Tony Sycamore, market analyst at IG.
