Oil Price Today (August 25): Crude oil at $92 as investors digest US economic sanctions on Iran. What’s next for investors?

Oil prices gained marginally on Tuesday after falling more than 2% in the previous session, as investors weighed the impact of tougher U.S. secondary sanctions on Iran.

Brent crude futures were up 6 cents, or 0.1%, at $92.16 a barrel, while U.S. West Texas Intermediate crude was up 15 cents at $85.12. Both contracts fell more than 2% on Monday, with U.S. crude touching a one-week low as investors took profits following a rally over the previous two weeks.

U.S. Treasury Secretary Scott Bessent on Monday unveiled an expansion of sanctions aimed at cutting off Iran's economic lifeline and forcing an end to the war between the two countries. He said countries would have to sever their business ties with Iran or risk being excluded from the dollar-based financial system.


Also read: 'Economic D-Day': US announces expansion of sanctions in 'onslaught' on Iran

Bessent did not identify the countries that would be targeted or say when the penalties would come into effect. He said countries would instead be given time to comply with the new directive.

U.S. Defense Secretary Pete Hegseth said on Monday that Washington would not rule out using military force against Iran. However, the U.S. is also turning towards greater economic pressure, which analysts said had eased concerns over threats to Middle Eastern oil supplies from the war.

Tensions remain, however. An oil tanker was struck by an unidentified projectile and disabled on Tuesday northeast of Oman's Ash Shishah, the United Kingdom Maritime Trade Operations said.

Iran continues to insist that it should control the key Strait of Hormuz. Before the war began in February, the waterway typically carried cargoes equivalent to about 20% of global oil consumption. On Monday, Iran named 45 tankers that it said had violated its rules for crossing the strait and threatened action against them, including confiscating their cargoes.

Supply disruptions resulting from the U.S.-Israeli war on Iran, which began on February 28, have led countries to draw down their commercial and strategic reserves.

Where are prices headed?

The duration of the disruption will be a key factor for crude prices. JPMorgan estimates that each additional month of disruption could add around $7 to $8 a barrel to Brent prices. If the disruption continues for three months, the bank expects average monthly Brent prices to reach around $114 a barrel.

Read more: Iran vows to retaliate after US widens sanctions

Goldman Sachs has also warned that Brent could climb to $120 a barrel if shipping disruptions through the Strait of Hormuz, the world's most important oil transit route, persist.

At the same time, Goldman Sachs expects tensions in the Middle East to eventually ease under its base case. The bank forecasts Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year. It said risks remained tilted to the upside, with disruptions through the Strait of Hormuz and the Red Sea potentially lasting longer than expected.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)