Oil Dips to $95 as Iran Ceasefire Deadline Looms and Talks Stall

In Asian trade on Tuesday, Brent oil fell 0.5% to $95.00 a barrel and WTI fell 0.9% to $86.68. This was after a sharp rise on Monday, as markets tried to figure out if U.S.-Iran talks would happen before the two-week ceasefire ends on Wednesday.

The session shows how this conflict works in a small scale: Iran is officially refusing to negotiate, but according to a report in the Wall Street Journal, it is telling regional mediators behind closed doors that it will send a delegation to Pakistan this week.

This is what Stephen Innes of SPI Asset Management wrote: "Markets are pricing the possibility of progress rather than its certainty." That frame is the best way to explain where oil is moving at the moment.

The Ceasefire Clock and Two Competing Narratives

The political picture is just as confusing as it was at the start of the eight-week war. The White House says that Vice President JD Vance is ready to go back to Pakistan to start new talks.

If the agreement ends, Trump told PBS, "then lots of bombs start going off." He also said that Iran "was supposed to be there" at the talks in Pakistan because "we agreed to be there." Additionally, he told Bloomberg that continuing the ceasefire was "highly unlikely" without a deal.

The way Iran acts in public is the opposite. Talks were turned down "under the shadow of threats," according to Mohammad Bagher Ghalibaf, speaker of parliament and top negotiator.

He wrote on X that "Trump wants to turn this negotiating table into a surrender table." According to him, Iran has "been preparing to show new cards on the battlefield" during the ceasefire window. This sounds less like an offer to negotiate and more like a warning.

The ceasefire officially ends at midnight on Tuesday in Iran time, but Trump set the deadline for Wednesday evening in Washington, D.C. This difference causes confusion that the market is reluctantly trading around.

A group of analysts from ANZ said it best: "Any peace agreement remains uncertain as Iran refuses to attend a second round of talks in Pakistan, citing the US blockade and vessel seizures as reasons."

The Blockade Economics: $500 Million a Day

Trump has made it clear that Iran is under a lot of financial pressure. He wrote on social media, "THE BLOCKADE, which we will not take off until there is a 'DEAL,' is completely destroying Iran." "They are losing $500 million a day, an unsustainable number, even in the short run."

That number is how Trump sees his negotiating power, and it may also help explain the WSJ's story that Iran is privately saying it's willing to send a delegation even though it says it won't in public. No matter what the leaders of parliament say about X, an economy that loses $500 million every day can only take so much bluffing.

The naval blockade of Iranian ports and the seizure of an Iranian-flagged ship last weekend were the direct causes of Tehran's latest closing of the Strait of Hormuz.

This is the second time in a week that the strait has been closed after briefly opening again. Iran says that the blockade is breaking the truce, and Washington says that Tehran is breaking the ceasefire by bothering ships.

Since both claims are being made at the same time, there is no clear reason for the ceasefire to be extended under the original terms.

Hormuz: The Physical Picture and a Partial Bypass Emerging

The Strait of Hormuz is still closed, cutting off about one-fifth of the world's crude supplies. This is what has caused oil prices to rise since the war started in late February. After the weekend's cycle of briefly reopening and reclosing, shipping traffic stayed low on Tuesday morning.

Pay attention to a significant change on the supply side. Analysts from ANZ said that Saudi Arabia and the UAE are sending more and more goods through Yanbu in the Red Sea and Fujairah in the Gulf of Oman instead of Hormuz.

Each of these sites can now load 6.5 million barrels of oil per day, up from 5 million barrels per day before the war. This 1.5 million bpd rise partly makes up for the problem with Hormuz and gives the region's export capacity a solid base, no matter how the diplomatic situation turns out.

There is a real bypass capacity, but it is restricted. According to ING, 13 million bpd of flow is being interrupted. This means that even if the Yanbu-Fujairah corridor is fully operating, it will only cover a small part of the supply gap. Hormuz settlement is still the only way to really lower prices.

The most important market event since the war started was the end of the ceasefire on Wednesday. The price range is set by three possible outcomes: a deal or stretch keeps Brent between $90 and $100, and the risk premium can keep slowly falling.

If the truce is broken cleanly and new attacks start, Brent will go back up to $107–$115 within sessions. If talks start but no deal is made, or if the ceasefire ends without quick military action, it's likely that crude will stay in the $93–$97 range while uncertainty grows.

"Trump's remark that a ceasefire extension is 'highly unlikely' if no deal is reached has effectively put a clock on the market," Innes said. "As negotiations go on, tough deadlines and strong language often soften. But having a deadline still helps people position themselves and raises the stakes around every headline."" Position size as needed through Wednesday.