Oil Prices Slide 3% as U.S.-Iran Tensions Show Signs of Thaw
By Katya Golubkova
TOKYO, Feb 2 (Reuters) – Oil markets opened the week with significant losses, shedding over 3% as signals of potential dialogue between Washington and Tehran prompted traders to reassess the geopolitical risk premium baked into prices.
Brent crude futures fell $2, or 2.9%, to $67.28 a barrel by 0100 GMT. U.S. West Texas Intermediate (WTI) crude followed suit, dropping $2, or 3.1%, to $63.17 a barrel. The decline marks a sharp reversal from the previous session's multi-month highs, which were fueled by escalating Middle East tensions.
The shift in sentiment followed U.S. President Donald Trump's weekend remarks, where he stated Iran was "seriously talking" with Washington. This came hours after a senior Iranian security official indicated arrangements for negotiations were underway. Trump expressed hope for a "negotiated deal" that would address nuclear concerns.
"The crude oil market is interpreting this as an encouraging step back from confrontation," said Tony Sycamore, a market analyst at IG. "It's easing the geopolitical risk premium built into the price during last week's rally and prompting a bout of profit-taking."
Adding to the calmer tone, reports indicated Iran's Revolutionary Guards had no immediate plans for live-fire exercises in the critical Strait of Hormuz, a key chokepoint for global oil shipments.
The price drop unfolds against a complex backdrop. On Sunday, the OPEC+ alliance, which includes Russia, agreed to maintain its current output levels for March, continuing a policy of restraint initially adopted in November due to seasonally weaker demand. Analysts note that while geopolitical flare-ups cause volatility, underlying market fundamentals remain soft.
"Geopolitical risks mask a fundamentally bearish oil market," Capital Economics noted in a recent report. "A well-supplied market continues to exert downward pressure on prices over the longer term."
Market Voices:
Sarah Chen, Portfolio Manager at Horizon Capital in Singapore: "This is a classic 'buy the rumor, sell the news' scenario. The market had priced in a worst-case conflict. Any hint of diplomacy was bound to trigger a correction. The focus now shifts back to OPEC+ discipline and global demand forecasts."
Marcus Johnson, Independent Energy Analyst based in Houston: "Let's not get carried away. A few comments don't resolve years of hostility. This is a temporary pullback, not a trend reversal. The structural risks in the Strait of Hormuz haven't disappeared, and the market remains one headline away from another spike."
David Miller, Retail Investor from London: "It's exhausting. The volatility is impossible to navigate. Prices shoot up on war fears, then crash on a single tweet. It feels less like investing and more like gambling on global politics."
Riya Patel, Economist at Global Insight Consultancy: "The reaction underscores how sensitive oil remains to Middle East tensions. However, the coordinated OPEC+ supply management provides a floor. We're likely seeing a reversion to a range defined by cartel policy on the lower end and geopolitical ceilings on the upper end."
(Reporting by Katya Golubkova in Tokyo; Editing by Chris Reese and Thomas Derpinghaus)