Also on Tuesday, the U.S. dollar weakened after President Donald Trump announced he will replace Rex Tillerson, a relative moderate, with the hawkish CIA director Mike Pompeo as Secretary of State.
Oil prices often rise as the dollar falls. A weaker greenback makes dollar-denominated commodities more expensive to holders of other currencies.
“The market is having a wobble on the back of the potential impact on future supply from Iran and also for the ramifications for the Middle East as a whole,” Saxo Bank’s Ole Hansen said.
“It may impact oil companies’ appetite for investment, so (Iran) might not cut production but it might go some way towards dampening their ability to maintain, let alone increase, production,” Hansen, a senior manager at Saxo Bank, added.
Kilduff acknowledged the news is feeding speculation that Trump could scrap the Iran nuclear deal, which could disrupt Iranian oil supplies and send prices higher. But he said the impact on Tuesday’s oil price movement is likely marginal.