US-Iran Talks Stall, Oil Prices Rebound but Face Limited Upside

Oil prices were unable to sustain early gains on Monday as US-Iran talks stalled, reviving concerns over prolonged Middle East tensions. Despite a brief spike of up to 1% to $89.40 per barrel for Brent crude futures, prices eventually fell back to $89.28 by 0620 GMT. US West Texas Intermediate crude futures declined 67 cents to $81.74 a barrel.

The recent surge in oil prices has largely reversed the lows seen in early August, but with hopes for a more permanent resolution between the US and Iran fading, geopolitical risk premiums have returned to the market. 'Oil prices have now rebounded almost completely from the lows seen in early August,' said Priyanka Sachdeva, head of market insights for Phillip Nova in Singapore.

However, Sachdeva sees limited upside potential unless there is clear evidence of renewed aggression in the Strait of Hormuz, particularly material damage to tankers or oil infrastructure. Shipping through the strait slowed over the weekend, with only five commodity vessels transiting on Saturday and none registered for Sunday.