Oil Prices Stabilize After US-Iran Tensions Cool

Oil prices found their footing on Tuesday, recovering slightly after a sharp sell-off in the previous session as traders weighed cooling geopolitical tensions between the U.S. and Iran against a new trade pact between the U.S. and India.

At 11:27 ET, Brent oil futures for April delivery were up 1% to $66.94 a barrel, while West Texas Intermediate (WTI) crude futures climbed 1.1% to $62.84 a barrel. This marks a reversal from Monday, when both benchmarks tumbled by more than 4%.

Diplomacy Eases Middle East Tensions

The primary catalyst for the market's recent volatility is a significant de-escalation in the standoff between Washington and Tehran. U.S. President Donald Trump remarked that Iran was "seriously talking" with the U.S., a comment that immediately eased fears of an imminent conflict.

Adding to the diplomatic momentum, reports confirmed that the U.S. and Iran are set to resume negotiations over Tehran's nuclear program this Friday in Turkey.

This news has helped pull some of the risk premium out of oil markets. For weeks, the threat of a regional war in the Middle East had supported crude prices, especially after the U.S. deployed warships to the region. However, it remains unclear if Friday's talks will lead to a breakthrough, as earlier negotiations have produced limited results.

US-India Trade Deal Reshuffles Global Oil Flows

Markets are also digesting a major trade agreement between the United States and India. Under the deal, the U.S. will slash tariffs on Indian goods from 50% to 18%. In return, India has agreed to halt its purchases of Russian oil and lower its own trade barriers.

This shift could have significant consequences for global supply dynamics. Analysts at ING noted that if India stops buying from Russia, it "will only lead to a further increase in the amount of Russian oil floating at sea."

This scenario would create downward pressure on the price of Urals crude as Russia seeks new buyers. "A lack of buyers means Russia would ultimately be forced to reduce output, tightening up the oil market," the analysts added.

Dollar's Pause Offers Crude a Breather

Currency market movements also played a key role. The U.S. dollar had strengthened late last week and on Monday, weighing on oil and other commodities.

The dollar's gains were fueled by the nomination of Warsh, who is viewed as a less dovish pick for the Federal Reserve than markets had anticipated. While he is still expected to oversee interest rate cuts, he is also projected to limit the central bank's asset-buying programs. This prospect of a less loose monetary policy boosted the greenback.

On Tuesday, however, the dollar's advance stalled, providing some support for crude prices and allowing them to edge higher.