Oil Nears $108 as Middle East War Risk Looms

U.S. crude futures traded near $107.80 a barrel on Tuesday after the U.S. administration issued mixed signals, including a reported temporary waiver tied to Iranian oil sanctions and a postponed strike on Iran, as traders focused on the risk of a wider Middle East conflict.

The front-month West Texas Intermediate contract fell about 1% after President Donald Trump delayed a planned strike and the government extended waivers related to Russian crude shipments, but the market quickly reversed earlier losses. A report from Iran’s negotiating team that the U.S. had proposed a temporary lift on Iranian oil sanctions briefly pushed prices below $105 before traders pushed values back toward $108.

Treasury Secretary Scott Bessent issued a 30-day general license for Russian oil cargoes intended to free barrels stranded at sea and ease flows to energy-dependent countries. Bessent said the extension would provide additional flexibility and help reroute supply to nations most in need by reducing China’s ability to stockpile discounted oil.

Market participants viewed the modest decline after the announcements as a sign that supply risks remain the dominant driver of volatility. They cited a pattern in which conflict headlines produce larger price spikes than diplomatic or administrative measures produce declines.

Higher oil prices are feeding into inflation expectations and tightening financial conditions, which can affect the timing of Federal Reserve rate cuts and reduce demand for risk assets, including major cryptocurrencies. Disruptions near the Strait of Hormuz have tightened tanker traffic and heightened the potential for supply shocks.

Analysts identified the near-term factors to watch as progress in U.S.-Iran negotiations, possible changes to sanctions or waivers, and any military developments that affect Middle East shipping. If diplomacy stalls or hostilities resume, they expect oil swings to remain elevated through the summer.

Former hedge fund manager Jim Cramer wrote that crude “goes down less when Trump says there is a hint of peace and it goes up much more when there is a rumor of war,” and added the market could test its prior $119 high if talks fail.