Crude Prices Dip as Tehran Confirms Delegation for Pakistan Peace Talks
In a surprise turnaround, crude oil prices plummeted on Tuesday as news broke that Iran is planning to send a diplomatic team to Islamabad, Pakistan, for peace talks with the United States, slated to be led by US Vice President JD Vance. This development comes despite Iran's publicly stated reluctance to re-engage in diplomatic efforts, with Mohammad Bagher Ghalibaf, the country's parliament speaker, emphasizing that negotiations would not take place "under the shadow of threats" from Washington. Nevertheless, sources close to the matter, as reported by the Wall Street Journal, indicate that Tehran has privately informed regional intermediaries of its intention to dispatch a delegation to Pakistan within days.
As a result, Brent crude prices dipped by as much as 1.1% to $94.44 per barrel, while West Texas Intermediate declined by 0.9% to $86.68 per barrel during Asian trading sessions, partially undoing the robust 5.6% gain seen on Monday. The composition of Iran's diplomatic team and its leadership remain unknown, fueling ongoing uncertainty and volatility in the market. Vice President Vance is en route to recommence discussions, which are anticipated to begin late Tuesday or early Wednesday morning.
Meanwhile, US President Trump has expressed skepticism about extending the current ceasefire beyond its Wednesday evening expiration, stating that it appears "highly unlikely." Trump also confirmed that US naval enforcement operations targeting Iran will continue until a comprehensive peace agreement is reached. The situation in the Strait of Hormuz, a strategically vital waterway that facilitates approximately one-fifth of global crude oil supplies, remains tense. Iran had temporarily lifted restrictions over the weekend but has since reimposed them, rendering the strait essentially impassable since hostilities commenced in late February.
Only three vessels attempted to transit the strait early Tuesday, highlighting the severity of the situation. In response, Saudi Arabia and the United Arab Emirates have initiated contingency routing to bypass Hormuz, with operations shifting to the Yanbu terminal along the Red Sea and the Fujairah terminal in the Gulf of Oman. The aggregate loading capacity at these alternative facilities has expanded to 6.5 million barrels daily, up from 5.0 million before the conflict erupted.
Against this backdrop, analysts at ANZ observe that the ongoing uncertainty surrounding Iran's diplomatic reengagement continues to overshadow any potential peace agreement. Citigroup forecasts that oil prices could surge to $110 per barrel if disruptions to the Strait of Hormuz persist for another 30 days. Fatih Birol, executive director of the International Energy Agency, warns that the global energy market could experience sustained volatility for up to two years due to the ongoing conflict. As Dilin Wu, research strategist at Pepperstone, notes, markets will remain "super sensitive to any headline updates in the next 24 hours."
In a related development, Chinese President Xi Jinping urged an immediate cessation of hostilities and the resumption of normal operations in the Strait of Hormuz during a telephone conversation with Saudi Crown Prince Mohammed bin Salman on Monday. As of Tuesday morning, no official confirmation of a second round of negotiations between US and Iranian representatives has been announced, with the ceasefire termination deadline remaining fixed for Wednesday evening.