Oil retreated from a six-month high on Monday after Oman announced that a third round of talks between Washington and Tehran will continue this week in Geneva.
Tensions have remained on high alert throughout the Middle East for weeks after U.S. President Donald Trump indicated a strike on Iran could be imminent.
Since then, a sense of calm has returned to oil markets, after reports on Friday indicated that any strike would be limited to military installations or government sites, reducing the risk for a protracted conflict between the two countries, and retaliation by Iran towards U.S. bases in the region.
“The geopolitical atmosphere, at least for today, has moderated a little bit, and I think that’s what we’re seeing being reflected in the pullback in prices,” Edward Bell, acting chief economist at Emirates NBD, told CNBC’s Dan Murphy on Monday.
Brent rallied to a six-month high of $71 last week, as Iran-related supply fears drove up risk premium, which Goldman Sachs said has embedded around $6 into the price of oil.
Oil retreats as Iran-U.S. talks announced
The third round of indirect talks between the U.S. and Iran are expected to continue in Geneva on Thursday between Iranian Foreign Minister Abbas Araghchi and U.S. special envoy to the Middle East Steve Witkoff. The talks will be mediated by Oman’s Foreign Minister Badr Al Busaidi.
The Trump Administration has been pushing for concessions regarding Iran’s nuclear program since talks restarted earlier this month in Oman. Relations had been at a standstill after Trump withdrew the United States from the JCPOA in 2018. The U.S. maintains that Iran cannot have nuclear weapons and cannot enrich uranium, meanwhile, Tehran has long argued its nuclear program is exclusively for civilian purposes.
Iran’s Aragchi has made several appearances on U.S. networks in recent days, in an attempt to communicate Iran’s position. He spent over 20 minutes with MS Now’s Morning Joe program on Friday. Over the weekend, Aragchi told CBS news Iran is “still working on” a proposal to present to Witkoff, but the country is “prepared to talk and negotiate on those drafts” at the meeting in Geneva on Thursday, adding that a “good chance” remained for a diplomatic solution on the nuclear issue.
Iran is “committed to peace and stability in the region,” Iran’s President Masoud Pezeshkian said on Sunday on X.
“Recent negotiations involved the exchange of practical proposals and yielded encouraging signals. However, we continue to closely monitor U.S. actions and have made all necessary preparations for any potential scenario,” he added.
Rising unrest
A second straight day of student protests has also taken place across Tehran. Students clashed with pro-regime demonstrators, commemorating lives lost in a brutal crackdown last month after nationwide protests engulfed Iran. The U.S.-based Human Rights Activists News Agency said at least 7,015 people were killed in the previous protests and crackdown, which the country’s Supreme Leader blamed on the U.S. and Trump.
The United States has since built out its largest military presence in the region, sending a second carrier strike group to the Middle East to join the USS Abraham Lincoln, which currently sits just 150 miles off the coast of Oman in the Arabian Sea.
While American assets in the region are pointed at Iran, “it’s especially impossible to know what Trump is going to do,” Tina Fordham, founder of Fordham Global Foresight, told CNBC’s Ian King on Monday.
“We’re still several days out from Thursday. There’s still no clarity in terms of how much commitment either side wants to have to make a deal. And as you’ve heard the commentary from both Iranian and U.S. officials, there’s still quite a lot of gap between them in terms of key points that they’re debating,” Bell told CNBC.
Supreme Court Setback
Trump’s ambitions in Iran might also have been set back by a recent Supreme Court ruling which found many of his sweeping tariffs announced last year to be illegal, casting fresh uncertainty over the president’s signature economic policy.
When it comes to Iran, what President Trump could end up deciding could swing either way, analysts told CNBC on Monday.
“Trump has a lot of avenues available that he can pursue, but the fact that he’s been dealt this blow by the Supreme Court suggests that he’s not going to be able to pursue this path seamlessly,” Fordham added.
According to the U.S. Constitution, Congress has the sole power to send U.S. troops to war, except for limited strikes for national security reasons. Both Republicans and Democrats have warned that the president needs Congressional approval before any potential action against Iran is taken.
