Oil prices fell more than $2 a barrel on Monday despite an expansion of U.S. sanctions targeting Iran, as traders took profits following two weeks of gains and assessed whether the new measures would materially reduce global crude supplies. Brent crude settled at $92.17 a barrel, down $2.22, while U.S. West Texas Intermediate declined $2.05 to $85.01, with the market weighing geopolitical risks against evidence that oil continues to reach international buyers.

Markets Look Beyond the Latest Sanctions

U.S. Treasury Secretary Scott Bessent announced an expansion of secondary sanctions against entities and countries maintaining business relationships with Iran. The move represents a significant escalation in economic pressure on Tehran, following President Donald Trump’s recent warnings of broader economic isolation.

However, the announcement did not immediately produce a comparable shock in crude prices. Oil had already gained more than 5% in each of the previous two weekly advances, leaving the market vulnerable to profit-taking. Analysts cited by Reuters also questioned how much additional impact the sanctions would have without stronger enforcement against Iran’s remaining trading partners, particularly China.

Hormuz Remains the Critical Supply Risk

The most important variable for the oil market remains the Strait of Hormuz, through which roughly a fifth of global oil supplies historically moved. Shipping data showed fewer than 20 commodity vessels transited the waterway over the weekend as Iranian and U.S. blockades continued to constrain traffic.

Yet the current price level suggests that markets still see sufficient volumes reaching consumers. SEB analyst Bjarne Schieldrop noted that Brent near $93 indicates that enough crude is continuing to flow through the Strait and the Persian Gulf. A more severe disruption, particularly a direct Iranian attempt to close the waterway using rockets or drones, could represent a materially different scenario for global energy markets.

At the same time, some producers and traders are adapting to the disruption. TotalEnergies Chief Executive Patrick Pouyanne said the company was moving oil profitably through the Strait, with higher transportation costs offset by steep discounts from crude producers. Iraq’s SOMO and QatarEnergy have also offered crude for loading inside the Strait, according to traders.

Forecasts Point to Continued Volatility

Iran’s response will remain central to the outlook. President Masoud Pezeshkian has called for a diplomatic solution, while Pakistan’s army chief visited Tehran for mediation discussions ahead of the U.S. sanctions announcement. The outcome of those diplomatic efforts could influence both shipping conditions and expectations for future Iranian exports.

Meanwhile, Morgan Stanley analysts have raised their Brent projections and expect the benchmark to peak at $100 a barrel in the fourth quarter. The International Energy Agency is not currently discussing another release from strategic reserves, according to its chief Fatih Birol. Going forward, traders will closely monitor the enforcement of U.S. sanctions, the volume of crude moving through the Persian Gulf and developments around Hormuz. The combination of geopolitical escalation, constrained shipping and resilient demand could keep oil markets volatile even as Monday’s decline demonstrates that elevated supply risks do not automatically translate into sustained price gains.