WTI Slips to $89 as US-Iran Talks Lower Supply Risk

WTI Below $90: Supply Risk Reversal

WTI crude fell to near $89.00 on Tuesday as diplomatic signals from the US and Iran reduced the near-term threat of a supply disruption in the Strait of Hormuz. The move reverses a portion of the war-risk premium that had pushed oil above $90 in prior sessions. Traders are pricing a lower probability of direct military conflict between the two countries, which would choke about 20% of global crude flows through the chokepoint.

How Peace Hopes Reshape FX Positioning

The oil decline changes the calculus for several currency pairs. A lower crude price eases import-cost inflation for Japan, the Eurozone, and India, making their respective currencies more attractive versus the dollar. Conversely, oil-linked currencies like the Canadian dollar and Norwegian krone lost ground as the risk premium faded. The USD/CAD pair pushed higher on the session, reflecting the immediate link between WTI and Canadian export revenues.

For the EUR/USD, the drop in energy costs removes a headwind that had been weighing on the single currency. European natural gas prices also eased in sympathy, though the primary catalyst remains the Iran diplomatic channel. The pound saw a more muted reaction, as UK oil exposure is smaller than the Eurozone's.