Oil futures settled lower on Tuesday, snapping a three-session winning streak, as market participants weighed hopes for a diplomatic resolution to the Iran conflict against ongoing concerns over supply disruptions through the Strait of Hormuz. Brent crude futures fell $1.24, or 1.5%, to settle at $84.12 per barrel, while West Texas Intermediate crude declined $1.08, or 1.3%, to finish at $80.67 per barrel.

Market Context

Global equity markets showed mixed signals as investors parsed conflicting data on U.S. consumer confidence and manufacturing activity. The U.S. dollar index ticked higher, pressuring dollar-denominated commodities across the board. Energy equities followed crude lower, with the Energy Select Sector SPDR Fund slipping 0.8% on the session. Meanwhile, natural gas futures rallied 4.2% on colder weather forecasts for the coming week.

Analysis

The session decline reflects shifting risk sentiment following reports that diplomatic channels between Washington and Tehran had reopened, raising hopes that a negotiated solution to the nuclear dispute could ease tensions in the Persian Gulf. 'The market has been pricing in a significant geopolitical risk premium, and any sign of de-escalation creates an immediate selloff,' said senior commodities strategist James Whitmore at Marex Capital. However, analysts note that the monthly performance remains robust, as concerns about Strait of Hormuz transit have not fully abated. The strait handles roughly 20% of global oil consumption daily, and any disruption would send prices soaring well beyond current levels.

Key Numbers

- Brent crude settled at $84.12 per barrel, down $1.24 on the session

- WTI crude finished at $80.67 per barrel, down $1.08

- Monthly gain for Brent stands at 3.2% through March

- WTI monthly advance totals 2.8%

- Energy Select Sector SPDR Fund fell 0.8%

- Natural gas futures jumped 4.2% on weather forecasts

What to Watch

Traders will monitor upcoming U.S. inventory data due Wednesday for signals on near-term demand. The EIA weekly petroleum report is expected to show a draw of 1.5 million barrels in crude stocks. Any escalation in Middle East hostilities could quickly reverse Tuesday's decline, while continued diplomatic progress may keep prices capped. Key technical support for Brent sits at $82.50, with resistance at $86.00.