Oil prices fall 2.4% as U.S. unveils Iran sanctions

Analysts see Iran’s response, not sanctions, as biggest oil risk

Oil futures ended six straight sessions of gains Monday, with West Texas Intermediate settling down 2.4% at $85.01 a barrel and Brent falling 2.4% to $92.17, after the U.S. Treasury announced a plan to sanction countries or companies that do business with Iran.

Treasury Secretary Scott Bessent announced the plan, which he has described as the “toughest sanctions in history,” in an afternoon press conference that traders had anticipated following the six-session rally.

Analysts said oil’s modest decline reflected a view that the sanctions’ immediate effect may be limited. “The immediate measures look less dramatic than the rhetoric,” Jorge Leon, Rystad Energy’s head of geopolitical analysis, said in a note. Iranian oil exports are already down with the U.S. blockade, and unless China reduces purchases further, the additional impact on Iranian oil revenues could be limited, he said. “The biggest oil-market risk may not be the sanctions themselves, but Iran’s response to them,” Leon said, adding that “Iran still has considerable capacity to disrupt everybody else’s exports.”

David Oxley of Capital Economics said in a note that much of the attention will fall on the implications for Iran’s oil exports. “In practice, though, we suspect that the new package will have only a limited direct impact on Iranian energy flows in the short term,” Oxley said, noting that most oil exports go to China, which has not recognized U.S. sanctions in the past. Depending on whether the sanctions accelerate or delay a resolution to the conflict, they could still have a sizeable impact on the energy landscape, he said.

Peter Cardillo of Spartan Capital said in a note the measures “could inflict significant economic pain on Iran, potentially moving the needle toward renewed and more serious talks with the U.S.”

Consultancy Iridium Advisors said Gulf markets face pressure this week from potential tightening sanctions on Iran and elevated U.S. Treasury yields, which stood at 4.69% on the 10-year note. The firm said details of what Bessent has called the “toughest sanctions in history” could push negotiations with Iran further out of reach, while the U.A.E.’s halt to trade and financial transactions with Tehran may raise questions over corporate exposure to Iranian customers, suppliers and payments. Higher Treasury yields could also lift regional discount rates and borrowing costs, weighing particularly on real estate, utilities, infrastructure and telecom stocks.

In the U.K., an expected rise in the energy price cap would more than offset Prime Minister Andy Burnham’s move to cut tax on electricity bills, Thomas Pugh at RSM UK said in a note. Ofgem, the country’s energy regulator, is expected to increase the price cap in October. Pugh said the cap is based on typical use for dual-fuel households, noting that some households use only electricity, where prices will probably fall. He said European gas storage is at a 10-year low, which could lift wholesale prices. “That would push household bills much higher in January, keeping inflation sticky in 2027.”

In company notes, UOB Kay Hian analysts said China Aviation Oil (Singapore) Corp. is likely to benefit from jet-fuel demand, noting the International Air Transport Association has projected Asia-Pacific air passenger volume will rise 5.1% in 2026. The brokerage maintains a buy rating on the jet-fuel supplier but lowered its target price to 1.88 Singapore dollars from S$2.63. Shares were 1.4% lower at S$1.43.

Affin Hwang IB analyst Tze Hern Ong said Dialog Group’s FY 2027 growth should be supported by the 150,000 cubic meter storage terminal Dialog Terminal Langsat 3 expansion, targeted for completion in September, and a 27.8%-owned LNG-linked air separation unit expected to be completed by late 2026. Ong added that 1Q FY 2027 earnings could moderate sequentially as the 35 million ringgit joint-venture dividend income from the previous quarter is unlikely to recur. Affin Hwang raised Dialog’s target price to 2.65 ringgit from 2.60 ringgit while maintaining a buy rating. Shares were 1.0% lower at 1.97 ringgit.

Jefferies said shares of fuel refiner and marketer Ampol should trade well after its first-half result beat its initial announcement. Ampol reported Ebit of A$1.39 billion, above the A$1.35 billion signaled weeks earlier. Analyst Michael Simotas said an interim dividend of A$1.85 a share is better than expected. Ampol ended last week at A$39.85.