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US Oil Update: Crude Dips Over 1% Ahead of US Sanctions on Iran

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Crude oil prices declined more than 1% on Monday as traders braced for a new package of US sanctions on Iran, even as Morgan Stanley warned of prolonged supply deficits and rising price forecasts.

Brent declined 1.4% to $93.07 per barrel, while West Texas Intermediate crude futures fell 1.8% to $85.50/bbl.

Market caution intensified as traders awaited specific details on a major economic offensive from Washington.

Market experts noted that crude slipped as markets braced for the US to present a plan isolating Iran economically, with US Treasury Secretary Scott Bessent slated to outline a package of sanctions targeting Iran's trade partners.

In response, Tehran has reportedly vowed to shut down all oil exports from the Gulf if the conflict persists.

Meanwhile, traffic and transit volumes through the critical Strait of Hormuz remain well below normal operational levels, keeping a heavy geopolitical risk premium baked into prices.

Amid these persistent supply constraints, Morgan Stanley revised its market outlook, noting that a recovery in Middle East supply will likely take well into 2027.

"Supply is tightening, inventories are drawing and the SPR buffer is diminishing," the bank noted.

"We now forecast a more drawn-out Middle East supply recovery, which leaves the market in deficit throughout Q4 and Q1. With that, we revise our Brent forecasts higher, peaking at $100/b in Q4," Morgan Stanley added.

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Weekly Crude Gains Nearly 6% as Hormuz Disruptions, US-Iran Tensions Lift Prices

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