MW Oil prices ease, but traders remain on edge ahead of this week's U.S.-Iran nuclear talks, OPEC+ meeting

By Myra P. Saefong

Washington may 'prefer to show the gun rather than fire it' ahead of the U.S. midterm elections, says analyst

Iran not only produces around 3% to 4% of the world's crude, but also has the ability to disrupt the flow of oil through the Strait of Hormuz.

Oil markets remain fixated on the threat of a U.S. attack on Iran - and this week could provide some clarity on the next move for crude prices, with talks between the two nations expected Thursday.

The risk of disruption to the global production and flow of oil hangs in the balance as President Donald Trump ratchets up pressure on Tehran to reach a nuclear deal. The U.S. military has reportedly amassed a large force in the Middle East region ahead of the expected nuclear talks.

"Really, the oil market is just at odds market trying to assess the probability of a strike and what type of strike it might be," said Phil Flynn, senior market analyst at the Price Futures Group. There's still some "skepticism that the Iranians will go the extra mile" to get a deal done with Trump, he told MarketWatch.

There have been reports that the Trump administration is surprised that Tehran is "not bending, considering the amount of firepower in the armada that they've sent to the Middle East," said Flynn, adding that "Iran has got to know that an attack would probably not end very well for them."

The U.S. military has increased its presence near Iran, bringing in more than 150 aircraft to bases in Europe and the Middle East after a second round of nuclear talks ended last week without a breakthrough, the Washington Post reported Tuesday, citing its review of flight and tracking data and satellite imagery.

Iran is important to the global oil market not just because it produces around up to 4% of the world's crude, but because it has the ability to disrupt the flow of oil through the Strait of Hormuz, a crucial maritime passage connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea.

In a late Monday note, Stephen Innes, managing partner at SPI Asset Management, said that given that backdrop, "oil is a coiled spring tied to a narrow waterway."

As tensions have flared, U.S. and global benchmark oil futures climbed nearly 6% last week. Prices eased back a bit to start this week, with West Texas Intermediate crude for April delivery (CLJ26) (CL.1) down 1% to settle at $65.63 a barrel on the New York Mercantile Exchange on Tuesday, and April Brent oil (BRNJ26) losing 1% to finish at $70.77 on ICE Futures Europe.

For oil, "it's all geopolitical right now," said Rob Thummel, senior portfolio manager at Tortoise Capital, who thinks there's a likely $5 to $6 "geopolitical risk premium" in oil prices today.

If tensions with Iran escalate, then another $5 to $10 of additional risk premium could be added to oil prices, he told MarketWatch.

However, the oil market has seesawed along with the changing likelihood of a U.S. strike on Iran.

Trump wrote in a Truth Social post Monday afternoon that U.S. General Dan Caine, the chairman of the Joint Chiefs of Staff, told him that "if a decision is made on going against Iran at a Military level, it is his opinion that it will be something easily won."

Still, there are some signs that Washington may "prefer to show the gun rather than fire it" ahead of the U.S. midterm elections in November, said Innes. Republican control of Congress could be at stake during those elections.

There are some signs that Washington may 'prefer to show the gun rather than fire it' at Iran ahead of the U.S. midterm elections in November.Stephen Innes, SPI Asset Management

Trump said he will be the one to make a decision on whether to strike Iran. "I would rather have a Deal than not," he said in his post, but "if we don't make a Deal, it will be a very bad day for that Country."

The president is "keeping everyone guessing, which is classic Trump," when it comes to whether the U.S. will reach a deal with Iran, said Flynn.

Meanwhile, developments tied to Iran also are likely to impact upcoming decisions by major oil producers. Output quotas for producers in the Organization of the Petroleum Exporting Countries and its allies are in question ahead of a monthly meeting set for Sunday.

Eight members of the group, known as OPEC+, had been raising oil production for most of last year. Now, they are expected to make a decision on output levels for April, and possibly beyond that, at a meeting set for March 1. The group decided in November to pause production increases for the first quarter of 2026. That failed to ease price declines in the face of an expected surplus of oil.

But if there is a U.S.-Iran conflict, Saudi Arabia, which is the biggest oil exporter within OPEC, would be open to raising crude production, said Flynn, as a disruption in the Strait of Hormuz would make the transport of oil in the region much more difficult.

In that case, an increase in output would have a "calming influence" if there's a spike in prices from a U.S.-Iran conflict, while an increase in production "without outside pressure of an attack would knock down prices a couple of bucks," he said.

-Myra P. Saefong

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February 24, 2026 16:17 ET (21:17 GMT)

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