-- Crude oil futures plunged in after-hours trading on Tuesday on reports that a second round of peace negotiations between the US and Iran could resume within days, easing market fears of a prolonged supply disruption despite the blockade of the Strait of Hormuz.
Front-month West Texas Intermediate crude futures tumbled by 7.08% to $92.07 per barrel, while Brent futures dropped by 4.18% to $95.11/bbl.
The second round of US-Iran peace talks is reportedly under discussion, with the negotiations expected to be held in Islamabad before the two-week ceasefire expires next week.
On Tuesday, Trump reportedly signaled that another round of US-Iran negotiations could happen in Islamabad, Pakistan soon.
Erik Meyersson, chief EM Strategist at SEB Research, said Monday that without progress on the diplomatic front, Hormuz will remain effectively closed, which would push oil prices higher.
Iran is also reportedly considering a short-term pause to its shipments via the Hormuz to avoid testing a US blockade and ruining the second round of peace talks.
The attacks on energy infrastructure in the Middle East and the closure of the Strait have led to the largest oil supply disruption in history, the International Energy Agency said in its monthly report, with 10.1 million barrels per day lost in March.
On Tuesday, US Central Command said that no ships had passed its blockade of Hormuz, a day after it began the blockade, which is now extending eastward into the Gulf of Oman and the Arabian Sea.
"However, the continued closure of the Strait raises the risk that the recovery of supplies will take much longer than it would have if this disruption had ended in a few weeks," Daniel Hynes, senior commodity strategist at ANZ, said.
Hynes said about half of the capacity of Arabian Gulf producers has been shut-in, and reactivation will be a long and difficult process.
Meanwhile, the Treasury Department said it will not renew a 30-day sanctions waiver on Iranian oil, set to expire this weekend, a move that threatens to further squeeze global energy markets.
"The short-term authorization permitting the sale of Iranian oil already stranded at sea is set to expire in a few days and will not be renewed," the Treasury said in a social media post on X.
The waiver, issued by the Treasury Department on Mar. 20, allowed about 140 million barrels of Iranian crude already at sea to reach buyers, primarily in Asia.
On the product side, the International Energy Agency said on Tuesday that the Middle East conflict is set to wipe out oil demand growth in 2026, resulting in the first annual decline since the Covid-19 pandemic.
The IEA expects global oil demand to contract by 80,000 barrels per day this year, 730,000 b/d less than the agency's previous projection that consumption would grow by 640,000 b/d.