Oil Prices Fall, Market Awaits US-Iran Lobbying Results

JAKARTA - Oil prices fell again on Tuesday. The market began to hold its breath, waiting for whether the talks between the United States and Iran would really continue this week. If the diplomatic track is open, oil supplies from the Middle East can loosen. If it stalls, it's a different story.

According to a report by Arab News quoted on Tuesday, April 21, the price of Brent crude fell by US$1.04 or 1.1 percent to US$94.44 per barrel at 09.00 Saudi time. US West Texas Intermediate (WTI) crude for May delivery fell by US$1.66 or 1.9 percent to US$87.95 per barrel. The May contract expires on Tuesday, while the more active June contract fell by US$1.24 or 1.4 percent to US$86.18 per barrel.

The decline reversed a sharp spike the day before. On Monday, Brent rose 5.6 percent and WTI jumped 6.9 percent after Iran again closed the Strait of Hormuz, a shipping route vital to world oil trade. The situation is becoming more tense after the US seized an Iranian cargo ship in a series of blockades against the country's ports.

Even so, market attention is now shifting to the negotiating table. Market participants see an opportunity for talks this week to lead to an extension of the existing ceasefire, or even a broader agreement. The problem is, the disruption of the oil flow has not disappeared and the risk of a new clash is still open.

ING analysts, a Dutch global bank, as quoted by Arab News, assessed that the energy market is still moving with an optimistic tone towards US-Iranian talks. However, they also reminded that the market still underestimated the ongoing supply disruptions. In their language, market optimism could cover the fact that the supply shock is not over.

From Tehran, the signal is also not unanimous. A senior Iranian official told Reuters that his country is still considering participating in peace talks in Pakistan, after Islamabad tried to push for an end to the US blockade. The obstacle is the blockade itself. At the same time, the validity of the two-week ceasefire will expire this week.

Citi, an American investment bank, sees the possibility of a memorandum of understanding being signed or an extension of the ceasefire still open. However, they also remind the market to be ready if negotiations fail and supply disruptions last longer.

The uncertainty was reiterated by Iranian Foreign Minister Abbas Araqchi. He said the "continued violations of the ceasefire" by the US were an obstacle to continuing negotiations. Meanwhile, the Speaker of the Iranian Parliament Mohammad Baqer Qalibaf stressed that Tehran would not negotiate under threat.

On the ground, ship traffic in the Strait of Hormuz on Monday is still limited. Although this strait is traversed by about a fifth of the world's oil supply. Citi estimates that if the disruption in the line lasts another month, the loss of supply could reach around 1.3 billion barrels. In that scenario, oil prices in the second quarter of 2026 could approach US$110 per barrel.

The pressure is already starting to be felt. Bloomberg reported that Kuwait declared force majeure or force majeure for oil shipments due to the blockade in the Strait of Hormuz. Meanwhile, Societe Generale noted that the spike in prices due to the closure of the strait so far has cut oil demand by about 3 percent. The biggest risk is that the longer this line does not recover, the greater the damage in the market.