Oil prices fell by more than 2% in early Asian trade on Monday as traders took profits from last week's rally and markets awaited details of a new U.S. sanctions package against Iran.

At the time of writing, WTI futures were trading at $85.18 per barrel, down 2.16%, while Brent futures traded at $92.32 per barrel, down 2.19%.

Both benchmarks gained more than 5% last week as the United States and Iran continued to trade threats, Iranian crude exports dropped, and tanker traffic through the Strait of Hormuz slowed to a trickle. The strait is the world's most important oil chokepoint, with roughly a fifth of global oil consumption — on the order of 20 million barrels per day of crude and refined products — normally transiting it, which is why even partial disruptions to its flows reverberate across world crude markets. Monday's pullback appears to be driven primarily by profit-taking from that rally rather than by any significant improvement in the underlying geopolitical picture.

One relative upside for traders is that no attacks have been confirmed in the Strait of Hormuz over the past 48 hours, although that may be partly due to the sharply reduced flow of tanker traffic.

On Sunday, CENTCOM stated that the U.S. blockade of Iranian ports has so far redirected 70 commercial vessels and disabled three. Iran, meanwhile, is stepping up its own efforts to control traffic through the strait, with the Iranian Persian Gulf Strait Authority publishing a list of dozens of vessels it says violated transit arrangements and warning that they could face future penalties.

The next major catalyst for oil markets will come from U.S. Treasury Secretary Scott Bessent, who is due to hold a press conference at 2 p.m. on Monday to announce new economic measures against Tehran.

Bessent dramatically raised expectations for the announcement over the weekend, writing in the Financial Times, where he described the coming campaign as an “economic D-Day.” In the piece, the Treasury secretary specifically singled out countries and entities that purchase and transport Iranian petroleum, facilitate Tehran's financial transactions, and turn a blind eye to seaborne transfers of Iranian fuel.

The U.S. blockade is already affecting Iran's oil exports: offers of Iranian crude to Chinese buyers have declined, and prices for the available Iranian barrels have risen. China has been the primary destination for Iranian crude in recent years, making the buyers and shipping intermediaries Bessent singled out central to whether financial pressure can succeed where the naval blockade leaves off. If the new announcement successfully deters buyers or intermediaries, the oil market could tighten further.

In response, Mohsen Rezaei, the recently appointed head of Iran's Supreme National Security Council, has warned that any country's participation in the U.S. economic campaign will be considered an “act of war.”

As always, the signals coming from Tehran are mixed. Iranian President Masoud Pezeshkian continues to defend the memorandum of understanding reached with Washington in June, describing diplomacy as the best route out of what he called a situation of “neither war nor peace.”

At the same time, Pakistani Army Chief Field Marshal Asim Munir is expected to travel to Tehran on Monday as Islamabad attempts to push the United States and Iran toward renewed negotiations.

For now, markets will be focused on exactly what measures Bessent announces on Monday, and whether they might materially reduce Iranian exports or provoke Tehran into escalating the conflict further. Beyond the sanctions detail itself, traders will also be tracking war-risk insurance premiums and freight rates for Gulf shipping, which have historically climbed during past flare-ups of tension between Iran and the West.

Reported by Josh Owens for OilPrice.com.