Oil falls ahead of US announcement on new Iran sanctions

U.S. Treasury Secretary Scott Bessent, set to hold a press conference at 2 p.m. EDT (1800 GMT) on Monday, has threatened to impose "the toughest sanctions in history" on Iran. President Donald Trump has also threatened to impose sanctions on Iran's trading partners.

"It is unclear whether U.S. policy to economically isolate Iran will prove effective," Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, wrote in a note.

"But if the U.S. measures do work as intended, Iran's ability to respond via increased violence becomes a growing risk for energy markets to consider."

Iran has condemned U.S. plans to announce new sanctions even as President Masoud Pezeshkian called for a diplomatic solution.

"The more pragmatic members of the Iranian leadership would prefer to de-escalate but the hardliners would probably prefer to fight to the bitter end," IG markets analyst Tony Sycamore said.

"I think by the end of this week we will have a good idea which side of the Iranian leadership has the upper hand."

Offers of Iranian crude to Chinese buyers have declined and prices have jumped as the U.S. blockade has cut Tehran's shipments, according to trade sources.

However, Iran has granted permission for a number of Iraqi oil tankers to pass through the Strait following repeated requests from Baghdad, Iran’s state news agency IRNA reported on Saturday.