Oil Prices Decline Amidst US-Iran De-escalation Hopes
Oil prices fell on Tuesday, February 3, 2026, continuing a downward trend as market participants assessed the potential for de-escalation in tensions between the United States and Iran. The price decline was also influenced by a strengthening US dollar, adding further downward pressure.
Brent crude futures were down 34 cents, or 0.5 percent, at $65.96 per barrel by 06:23 GMT, while US West Texas Intermediate (WTI) crude was trading at $61.81 a barrel, a decrease of 32 cents, or 0.5 percent.
The price drop followed a more significant decline on Monday, with oil prices falling more than 4 percent after US President Donald Trump indicated that Iran was “seriously talking” with Washington, signaling a possible easing of tensions.
Talks between Iranian and US officials are expected to resume on Friday in Istanbul, Turkey, according to officials from both sides. President Trump cautioned that the presence of US warships near Iran could lead to negative outcomes if a deal isn’t reached.
Iranian President Masoud Pezeshkian posted on X (formerly Twitter) on Tuesday, stating that talks with the US should be pursued to secure Iran’s national interests, provided that “threats and unreasonable expectations” are avoided.
According to OANDA senior market analyst Kelvin Wong, the volatility in oil prices over the past four weeks has been driven by the “geopolitical risk premium factor” linked to the US administration’s foreign policy, particularly the fluctuating threats towards Iran.
Adding to the downward pressure, the US dollar index was hovering near its highest level in over a week. A stronger dollar makes crude oil more expensive for buyers using other currencies.
ING analysts noted that the recovery of the US dollar, following President Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, also contributed to the decline in oil prices.
A trade deal between the US and India, announced Monday by President Trump, also impacted market sentiment. The deal involves the US reducing tariffs on Indian goods from 50 percent to 18 percent in exchange for India halting purchases of Russian oil and lowering trade barriers. ING analysts suggested this could lead to an increase in the amount of Russian oil “floating at sea.”
President Trump announced the agreement on social media after a call with Indian Prime Minister Narendra Modi, adding that India had agreed to purchase oil from the US and potentially Venezuela.
Analysts anticipate continued volatility in oil prices throughout February. Phillip Nova’s senior market analyst Priyanka Sachdeva predicted that prices are “likely to remain choppy and range-bound… (and) are expected to stay highly reactive to headlines and macro cues rather than a decisive trend, with risk skewed to the downside.”
