Goldman Sachs expects Brent to remain in an $80-$90 a barrel range until there is either confirmation of a new U.S.-Iran agreement or a significant escalation in attacks and targets.
The bank said the physical oil market was tightening, with its global visible stocks counter showing inventories falling by 6.3 million barrels per day over the past two weeks, likely driven by lower flows from the Persian Gulf and Red Sea, reduced Russian oil exports, and stronger Asian imports, including from China.
Oil prices rise as diplomatic path remains unclear
Oil prices rose on Tuesday as a diplomatic resolution to the U.S.-Iran conflict remained uncertain, while disruptions to oil flows through key shipping routes persisted.
Front-month Brent futures rose $1.04, or 1.24%, to $84.81 a barrel by 0800 GMT after dropping 7% in the previous session to a three-week low.
U.S. West Texas Intermediate (WTI) crude was up 30 cents, or 0.37%, at $80.64 a barrel after falling more than 5% in the previous session to its lowest in nearly a week.
Prices had dropped after U.S. President Donald Trump said on Sunday he was holding off on new attacks on Iran pending ongoing talks to end their war and settle claims over control of the key Strait of Hormuz.
On Monday, however, Iran's Foreign Ministry spokesman Esmail Baghaei rejected Trump's claim, saying no negotiations with the U.S. were taking place and no meetings were scheduled.
"The subsequent marginal gain in prices suggests that investors remain reluctant to fully price out the risk of renewed escalation leaving the market front and centre influenced by geopolitical headlines," said Ahmad Assiri, research strategist at Pepperstone.
Shipping traffic through Gulf waterways remains constrained
The Hormuz dispute is a central sticking point in talks. Before the conflict began in late February, the Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies.
"Gulf exports remained under pressure, with Strait of Hormuz transits only marginally improving from extremely depressed levels. The export disruption story is intact, with Iranian attacks on vessels constraining flows," ANZ analysts said.
Shipping traffic at the key Gulf waterways of Bab el-Mandeb and the Strait of Hormuz held largely unchanged at the start of the week.
Hormuz remains dangerous for vessels. On Tuesday, the UK Maritime Trade Operations agency flagged an incident 20 nautical miles (37 km) northeast of Oman's Al Khasab, after a cargo vessel broadcast that it had been hit by an unknown projectile.
In the Red Sea, six Saudi-flagged supertankers changed course in the Gulf of Aden recently for southern Africa, while two tankers laden with Saudi oil crossed the Bab el-Mandeb Strait, shipping data showed on Monday.
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