Oil prices dip as mediation efforts offset US-Iran strikes

• Yemen’s Houthis threaten naval blockade of Saudi Arabia.
• Received mediators’ proposal, says Iranian official.
• US, Iran exchange fresh strikes.

Oil prices softened on Tuesday, with markets weighing reports of mediation efforts between the US and Iran against an exchange of fresh attacks between the two and threats of a naval blockade of Saudi Arabia by Yemen’s Houthis.

Brent crude futures LCOc1 eased 35 cents, or 0.4%, to $88.87 per barrel by 0052 GMT, while US West Texas Intermediate crude CLc1 for September delivery was steady at $82.47 a barrel. Both contracts were trading below their highest levels in more than a month hit in the previous session.

Yemen’s Iran-aligned Houthis said on Monday they would impose a naval blockade on Saudi Arabia, opening a potential new front against the US in its war on Iran and raising the threat to global energy supplies and trade beyond the Gulf.

“The threats of a naval blockade on Saudi Arabia by the Houthis are significant because they raise the risk of disruption to another major oil exporter,” said Tim Waterer, chief market analyst at KCM Trade.

Separately, a senior Iranian official told Reuters that Tehran had received a proposal from mediators for a 10-day ceasefire in efforts to salvage an interim deal signed on June 17, intended to pave the way for a lasting agreement to end the war that began on February 28 with US-Israeli attacks on Iran.

The diplomatic push followed another night of US strikes on Iranian cities and attacks by Iran’s Revolutionary Guards on US military assets across the region. Later on Monday, US Central Command said it had begun another round of strikes on Iran.

“(Oil) has come a long way already and it certainly has the potential to go higher again. However, in the short term the overnight talk of de-escalation and peace talks appears to be capping the upside for the time being. Whether anything comes from those peace talks remains to be seen,” IG market analyst Tony Sycamore said in a note.

US crude oil stockpiles were expected to have fallen last week alongside gasoline, while distillate stocks likely rose, a preliminary Reuters poll showed on Monday.