Oil Down as US Expected to Build Economic Pressure on Iran
By TaiwanPlus
Oil prices have fallen as traders prepared for new US financial measures against Iran and its trading partners amid the possibility Iran could shut off all oil exports from the Gulf region.
US-Iran War: Oil Prices Slip as US Threatens ‘Financial Offensive’
REPORTER:
Oil prices have fallen ahead of likely US economic restrictions on Iran and its trading partners.
The US has threatened far-reaching sanctions designed to further squeeze Iran’s government and isolate the country economically. Those trading with Iran would also face US sanctions under the measures. In return, Iran says it will completely stop oil exports from the Gulf region and consider any country’s support for the US campaign an act of war. The US Treasury Secretary will make an announcement on the matter later today.
The U.S. threatened Iran with what it called "the greatest financial offensive ever marshalled" as it prepared to roll out economic sanctions on Monday that target Iran's trade partners.
Iran in turn vowed to shut down all oil exports from the Gulf "if the economic war continues."
U.S. Treasury Secretary Scott Bessent will hold a press conference at 2 p.m. EDT (1800 GMT) on Monday amid promises to reveal even more severe measures on a country that has endured near-continuous economic sanctions since the Islamic Revolution of 1979.
"At dawn begins an economic D-Day — the single greatest financial offensive ever marshalled against an adversary," Bessent wrote in an opinion piece published in the Financial Times on Sunday.
The warring nations have not conducted military strikes against each other for weeks, but they also have not engaged in meaningful talks to end the six-month-old conflict.
Thousands of people have died, most of them in Iran and Lebanon, since the U.S. and Israel began strikes on February 28, degrading much of Iran's conventional military capacity and inflicting economic pain while killing Iranian Supreme Leader Ayatollah Ali Khamenei.
But Iran has preserved enough missile and drone capability to attack its Gulf neighbors and threaten oil tankers in the Strait of Hormuz, bringing shipping in the key waterway to a near standstill and pressuring world fuel prices. The exact state of Iran's nuclear program, which the Americans and Israelis aim to wipe out, remains unknown.
Without detailing specific measures, Bessent signaled the U.S. would target "fearful nations" that practice "appeasement" by engaging with Iran's economy and financial system.
"They would do well to consider the consequences of sustaining it," he wrote in the Financial Times.
Iran has been bracing for the sanctions for days, issuing a series of strongly worded statements suggesting it planned a major military response.
Mohsen Rezaei (SECRETARY OF IRAN'S SUPREME NATIONAL SECURITY COUNCIL):
"If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf. Iran will regard any country’s participation in or support for America’s economic war against the Iranian people as an act of war."
Bessent previously urged China to cooperate with the U.S., noting China receives half of its oil imports from the Gulf region. A spokesperson for China's embassy in Washington responded with a statement that "sanctions and pressure do not help resolve the problem," while calling for diplomacy.
Iran's economy was already under pressure from international sanctions before the U.S. and Israeli attacks destroyed parts of its infrastructure.
Though Tehran remains outwardly defiant, Iranian officials have warned that further economic punishment could increase hardships, reignite unrest and further erode the Islamic Republic's legitimacy.
Iran entered the war with high inflation, a weakening currency, energy shortages, sanctions and deep structural weaknesses, and must now contend with damaged infrastructure, disrupted trade, lost production and the cost of rebuilding.
In the absence of official face-to-face talks between the U.S. and Iran, which were last conducted in June in Switzerland, other nations including Qatar, Pakistan and Turkey have attempted to promote diplomacy.
Iran said Pakistan's army chief, Asim Munir, will visit Tehran on Monday as part of efforts to restore peace and security in the region, but gave few details.
Pakistan has been mediating in the conflict and a Pakistani government source said Munir would touch on recent developments including the U.S. threat of new sanctions.
U.S.-Israeli strikes on Iran and Israeli attacks on Lebanon during the war have killed thousands and displaced millions. The U.S. reported 18 military personnel killed and more than 750 wounded.
Oil prices slipped more than $1 a barrel on Monday as investors took profits ahead of an expected announcement from Washington about imposing more sanctions on Iran that may further disrupt supplies from the Middle East.
Brent crude futures fell $1.22, or 1.29%, to $93.17 by 0035 GMT, while U.S. West Texas Intermediate crude was at $85.86 a barrel, down $1.20, or 1.38%.
Both contracts posted their second weekly gains last week, up more than 5%, as peace talks between the U.S. and Iran hit a stalemate, capping oil shipments through the Strait of Hormuz where a fifth of the world's supply used to transit.
U.S. Treasury Secretary Scott Bessent, set to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday, has threatened to impose "the toughest sanctions in history" on Iran. President Donald Trump has also threatened to impose sanctions on Iran's trading partners.
Vivek Dhar (COMMODITIES ANALYST, COMMONWEALTH BANK OF AUSTRALIA):
"It is unclear whether U.S. policy to economically isolate Iran will prove effective. But if the U.S. measures do work as intended, Iran's ability to respond via increased violence becomes a growing risk for energy markets to consider."
Iran has condemned U.S. plans to announce new sanctions even as President Masoud Pezeshkian called for a diplomatic solution.
Tony Sycamore (IG MARKETS ANALYST):
"The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end. I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."
Offers of Iranian crude to Chinese buyers have declined and prices have jumped as the U.S. blockade has cut Tehran's shipments, according to trade sources.
However, Iran has granted permission for a number of Iraqi oil tankers to pass through the Strait following repeated requests from Baghdad, Iran’s state news agency IRNA reported on Saturday.
