Crude oil prices started the week lower, following a 6% gain last week. The previous week’s rally was primarily driven by rising geopolitical tensions, particularly the ongoing conflict between Russia and Ukraine. As of this writing, Brent crude was priced at $74.58 per barrel, while West Texas Intermediate (WTI) stood at $70.65 per barrel.
Meanwhile, Iran’s stance on its enriched uranium program has shifted, amid expectations of stricter sanctions under the incoming U.S. administration. Bloomberg reported that Tehran has indicated plans to increase its uranium enrichment capacity in response to censure from the International Atomic Energy Agency (IAEA). This move comes as Iran anticipates that Donald Trump’s presidency, starting in January, will lead to a crackdown on its oil exports.
“The IAEA censure and Iran’s reaction increase the likelihood that Trump will push to enforce sanctions against Iranian oil shipments,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia, in an interview with Bloomberg. He added that disruptions of up to 1 million barrels per day in Iranian oil production could be on the horizon.
The IAEA issued a resolution last Thursday demanding that Iran enhance its cooperation with the agency. The UK, France, Germany, and the United States criticized Iran’s recent pledge to limit its enriched uranium stocks, calling it “insufficient and insincere,” according to Reuters.
However, the IAEA’s resolution seems to have had the opposite effect of what was intended. In response, Iran announced plans to further ramp up uranium enrichment. This has added to concerns in the oil market, with analysts noting the potential for wider regional instability.
“Markets are worried not only about the potential damage to oil ports and infrastructure but also about the broader risk of escalating conflict involving more countries,” said Priyanka Sachdeva, an analyst at Phillip Nova, speaking to Reuters.
Iran has also announced that it will hold talks with the UK, France, and Germany next Friday to discuss its nuclear program and the IAEA resolution.
“Oil prices are cooling slightly as the week begins, with investors awaiting further developments on geopolitical tensions and insights into the Federal Reserve’s policy direction,” said Yeap Jun Rong, an analyst at IG, in a statement to the publication.
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