WTI falls toward $81.00 as Israel and Iran downplay the risk of further escalation

• WTI Oil price depreciates on de-escalated geopolitical tensions in the Middle East.
• US House passed new sanctions on Iran’s oil sector set to become part of a foreign-aid package.
• The hawkish sentiment surrounding the Fed’s monetary policy puts pressure on the crude Oil’s outlook.

West Texas Intermediate (WTI) Oil price trades around $81.20 per barrel, hovering around its monthly low of $81.05, marked on Thursday. The decline in crude Oil prices can indeed be linked to eased geopolitical concerns in the Middle East, particularly following Reuters reports that Israel and Iran downplayed the risk of further escalation after Israel's strike on Iran.

Meanwhile, the passage of new sanctions on Iran's Oil sector by the US House, as reported by Bloomberg on Saturday, could also have implications for Oil prices, and restrict its ability to export crude Oil. This can reduce global Oil supply and contribute to upward pressure on prices. However, the impact of such sanctions on Oil prices depends on various factors, including the extent of the sanctions, and the response of other Oil-producing countries.

The expansion of secondary sanctions to cover transactions between Chinese financial institutions and sanctioned Iranian banks used for purchasing petroleum and Oil-derived products could indeed impact the crude Oil market.

On the demand side, the outlook for crude Oil is influenced by expectations regarding US monetary policy. The Federal Reserve's (Fed) indication that it may keep interest rates higher for longer, driven by concerns about persistent inflation, can affect the price of Oil. Higher interest rates tend to strengthen the US dollar (USD), making Oil more expensive for countries using other currencies, which can dampen global demand and contribute to lower prices.

The hawkish remarks from Federal Reserve officials, such as those made by Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic, reinforce expectations of a tighter monetary policy stance, which could further support the US dollar and potentially weigh on crude Oil prices.