Crude sold off sharply despite the escalation in US pressure on Iran, highlighting how much of the recent risk premium had already been priced in after two straight weekly gains of more than 5%. Traders viewed Scott Bessent's sanctions rollout as broadly telegraphed, with little fresh detail to justify keeping recent long positions. The market is now focused on whether Washington's threat of secondary sanctions can materially reduce flows to Iran's remaining buyers, chiefly China, which analysts say is the key swing factor for prices. That keeps attention on enforcement rather than announcements alone, because the practical effect of sanctions often depends on how widely they are applied across shipping, finance and trading networks. Morgan Stanley's more bullish Brent call for the fourth quarter suggests the market still assigns meaningful upside risk even after Monday's pullback, leaving room for renewed strength if enforcement tightens or transit through the Strait of Hormuz becomes more constrained.

Oil dropped on profit taking even as Washington expanded its sanctions campaign against Iran, with traders unconvinced the latest measures would change much on the ground.

Brent settled down by about $2, or roughly 2.3%, to around $92, while US West Texas Intermediate crude fell a similar amount to near $85, according to Reuters. Both benchmarks had posted a second consecutive weekly gain last week, rising more than 5% each.

The sell-off came despite a further escalation in US pressure on Tehran. Treasury Secretary Scott Bessent used a press conference to announce an expansion of secondary sanctions that Washington can impose on entities and countries doing business with Iran, warning that the country faced a choice between normalcy and total isolation. The move followed the earlier launch of "Operation Economic Outcast," under which the Treasury sanctioned nearly 60 Iran-linked entities, individuals and vessels across nuclear, missile, cyber and oil networks, while flagging five sectors for possible additional secondary sanctions and warning countries helping Iran to stop within a limited window.

Analysts said the latest announcement offered little that markets had not already priced in. One strategist said there was not much new in Bessent's remarks beyond what had already been signaled, adding that the market's strong run over the prior week had set the stage for profit taking. Others said the real test is how aggressively Washington enforces secondary sanctions against Iran's remaining trading partners, particularly China, since anything short of a material cut in Chinese purchases would likely limit the impact on Iranian oil revenue.

Iran condemned the sanctions push, with President Masoud Pezeshkian calling for a diplomatic solution. Pakistan's army chief held mediation talks in Tehran ahead of the announcement.

Shipping through the Strait of Hormuz remained constrained, with fewer than 20 commodity vessels transiting over the weekend. TotalEnergies said it continues to move crude profitably through the strait despite higher costs, helped by steep discounts from producers. Iraq's SOMO and QatarEnergy both offered crude for loading inside the strait.

Looking ahead, Morgan Stanley raised its Brent forecast to a fourth-quarter peak of around $100 a barrel, while the IEA said it is not currently discussing a further release from strategic reserves. With Oman's foreign minister due in Tehran to discuss Hormuz security and reports that Trump has enlisted Pakistan's help to revive US-Iran talks, the market remains focused on whether diplomacy or further escalation will shape the next move.