WTI Crude Retreats to Near $85 Ahead of US Economic Offensive Against Iran

WTI crude prices retreated on Monday, giving back some of the gains recorded earlier amid escalating US-Iran tensions. With the US government set to unveil a new round of sanctions against Iran, market sentiment turned cautious, prompting some investors to lock in profits and pulling prices back from recent highs.

**Geopolitical Risk Premium Supported Earlier Gains**

Earlier, escalating tensions between the US and Iran heightened concerns over potential disruptions to global crude supply, providing strong geopolitical risk premium for oil prices. US Treasury Secretary Bessent was reported to have described the upcoming sanctions as an "economic D-Day," warning of severe penalties for Iran's trading partners. Meanwhile, transit through the key oil chokepoint of the Strait of Hormuz—which carries roughly one-fifth of global oil supply—remained constrained, further amplifying supply-side vulnerabilities. Against this backdrop, WTI prices rallied strongly last week, briefly breaking through the $85–86 per barrel resistance zone.

**Cautious Sentiment Ahead of Sanctions**

Entering the new week, market focus shifted to the details of the sanctions. According to Reuters, investors chose to lock in profits before clarity emerged, sending oil prices down more than 1% in early Asian electronic trading. At the time of writing, WTI crude was trading around $85.53 per barrel. Despite the short-term pullback, market analysts believe that as long as supply risks in the Strait of Hormuz remain unresolved, the bullish trend for oil prices stays intact. Forex.com analyst Fawad Razaqzada noted that the current crude market is primarily supply-driven, and significant price declines are unlikely until supply risks are alleviated.

**Focus on Sanctions' Severity and Iran's Response**

Markets are closely watching the specifics of the sanctions set to be announced by the US Treasury and their actual impact on Iran's oil exports. Iran has previously warned that if the economic war persists, it would consider completely cutting off oil exports through the Persian Gulf. The outcome of the standoff between the two sides will be key in determining the short-term direction of oil prices. If sanctions prove more severe than expected or Iran takes substantive countermeasures, it could reignite upward momentum in oil prices; conversely, if signs of de-escalation emerge, prices could face further profit-taking pressure.