Oil prices staged a recovery on Tuesday, bouncing back from a sharp decline in the previous session as market sentiment shifted toward tempered optimism regarding U.S.-Iran peace negotiations.
The rebound reflects a cautious recalibration of supply risk after U.S. President Donald Trump announced on Sunday that he was holding off on new attacks on Iran while talks to end the conflict continue.
Earlier in July, Iran warned oil tankers to use approved routes or face forceful responses, raising concerns about potential blockades and supply chain disruptions.
The pause in military escalation provided immediate relief to traders who had priced in heightened disruption risks following weeks of intensified hostilities.
Brent crude and WTI both moved higher in early trading, reversing some of the losses seen when fears of a broader regional war peaked.
The market is now balancing the prospect of a diplomatic resolution against the lingering threat of renewed violence if negotiations stall.
This development follows a period of extreme volatility driven by shipping risks in the Strait of Hormuz.
Earlier in July, Iran warned oil tankers to use approved routes or face forceful responses, raising concerns about potential blockades and supply chain disruptions. The uncertainty has kept a significant risk premium embedded in energy prices, with traders wary of any sudden escalation that could disrupt the flow of millions of barrels of oil daily.