Oil prices slip as diplomacy advances and tariff fight clouds outlook

Monday 23 February 2026 - 09:20

By: Dakir Madiha

Oil prices slip as diplomacy advances and tariff fight clouds outlook

Oil prices retreated as traders weighed signs of progress in United States–Iran nuclear diplomacy against a fresh layer of uncertainty from President Donald Trump’s new across‑the‑board import tariffs. Brent crude futures slipped to around 71 dollars a barrel and US West Texas Intermediate hovered near 66 dollars, giving back part of last week’s sharp gains that had been fuelled by fears of a military clash in the Middle East and potential supply disruption.

The pullback followed confirmation from Oman that Washington and Tehran are preparing for a third round of indirect nuclear talks in Geneva, a development that has softened expectations of imminent conflict in the Gulf and narrowed the geopolitical risk premium embedded in crude prices. Iranian Foreign Minister Abbas Araghchi said there was a “good chance” of reaching an agreement and insisted that Iran’s focus remained confined to nuclear and sanctions issues, even as he defended the country’s right to enrich uranium. Omani Foreign Minister Badr al‑Busaidi signalled a constructive mood, saying mediators were working to give the negotiations a decisive push toward a compromise that could ultimately reopen the door for higher Iranian oil exports.

Despite the diplomatic momentum, the political distance between the two sides remains wide. US special envoy Steve Witkoff has framed “zero enrichment” as a non‑negotiable condition for any deal, a red line Iran has repeatedly rejected as incompatible with its sovereign rights and domestic red lines. Analysts warn that failure to reconcile these positions would revive the risk of confrontation, especially after Trump gave Tehran 10 to 15 days from 20 February to accept a deal or face the prospect of US military action, backed by the recent deployment of additional US naval assets to the region.

At the same time, financial markets are grappling with abrupt changes in US trade policy after the Supreme Court invalidated Trump’s earlier tariff programme under the International Emergency Economic Powers Act. In a 6–3 ruling in Learning Resources, Inc. v. Trump, Chief Justice John Roberts wrote that IEEPA does not grant the president open‑ended authority to levy tariffs and criticised the administration’s reading of “two words separated by 16 others” in the statute as a basis for a sweeping new tax regime on imports. The decision clipped the White House’s use of emergency economic powers and forced the administration to pivot rapidly to a different legal tool.

Within hours of the court’s decision, Trump moved to reassert tariff leverage by invoking Section 122 of the Trade Act of 1974, an obscure balance‑of‑payments provision that had never been applied on such a broad scale. After initially signing an executive order for a 10 percent across‑the‑board duty, he announced a blanket increase to 15 percent on all US imports, the maximum rate permitted under Section 122, with the measure set to run for up to 150 days unless Congress decides otherwise. Economists say the higher levy injects new uncertainty into global trade flows and could weigh on industrial activity and energy demand if it persists or escalates into broader retaliation.

Banks and market strategists see oil caught between near‑term geopolitical headlines and more structural forces. Goldman Sachs has lifted its Brent forecast for the fourth quarter of 2026 by six dollars to 60 dollars a barrel, citing tighter‑than‑expected inventories across advanced economies, while projecting an annual average of 64 dollars. The bank cautions that any substantial easing of sanctions on Iran or Russia could knock five to eight dollars off Brent as additional barrels reach the market, while a breakdown in nuclear talks that leads to fresh disruptions could send prices sharply higher. Analysts at ING and other houses argue that, over the coming weeks, traders are likely to keep assigning a sizeable risk premium to crude until there is clearer evidence that diplomacy is either decisively succeeding or failing, especially with US tariff policy still in flux and global growth forecasts under strain.