Oil prices swung back from early losses Thursday after the Department of Treasury announced fresh sanctions on an international network funneling Iranian crude to China, a move that underscored Washington's ongoing efforts to curb Tehran's oil revenues.

West Texas Intermediate crude, which is closely tracked by the United States Oil Fund USO, briefly rebounded to $71 a barrel by midday trading in New York, erasing earlier declines sparked by renewed hopes of peace talks between Russia and Ukraine.

US Targets Iran’s Oil Network

In a press release shared Thursday, the Department of the Treasury's Office of Foreign Assets Control detailed its latest crackdown, targeting entities and individuals across multiple jurisdictions, including China, India and the United Arab Emirates, for facilitating the shipment of Iranian crude oil worth hundreds of millions of dollars.

The targeted shipments were conducted on behalf of Iran's Armed Forces General Staff and its front company, Sepehr Energy Jahan Nama Pars – Sepehr Energy, according to OFAC.

Iran's oil exports have long been a crucial revenue source, generating billions of dollars annually. The U.S. alleges these funds are used to support Iran's nuclear program, ballistic missile development and armed proxy groups across the Middle East.

"The Iranian regime remains focused on leveraging its oil revenues to fund the development of its nuclear program, to produce its deadly ballistic missiles and unmanned aerial vehicles, and to support its regional terrorist proxy groups," said Treasury Secretary Scott Bessent.

"The United States is committed to aggressively targeting any attempt by Iran to secure funding for these malign activities."

The move marks the first concrete action following President Donald Trump‘s memorandum aimed at exerting “maximum economic pressure” on Iran.

According to data shared by Energy Intelligence, Iranian crude exports averaged around 1.7 million barrels per day in 2024 and the bulk of it was directed to China.

Oil Prices Whipsaw on Russia-Ukraine Peace Hopes

Earlier in the session, crude prices had been under pressure following reports that a meeting between Russian President Vladimir Putin and U.S. President Donald Trump was at an “advanced stage,” according to Russian news sources cited by Reuters.

Investors interpreted the news as a potential step toward de-escalation in Ukraine, leading to a temporary pullback in crude prices as traders reassessed the geopolitical risk premium.

Adding to downward pressure, Bloomberg reported Russia's flagship Urals crude had fallen below the $60-a-barrel price cap for the first time since December, signaling that U.S. and European sanctions may be curbing Moscow's oil revenues.

Yet, as soon as the U.S. Treasury's Iran sanctions were announced, crude prices reversed their losses, with traders weighing the potential impact on global supply.

Energy Stocks React As Oil Market Volatility Rises

The broader energy sector reflected the volatility in oil markets. The Energy Select Sector SPDR Fund XLE fell 1.7% Thursday, with major oil and gas stocks seeing sharp declines.

Baker Hughes Co. BKR dropped 3.5%, Kinder Morgan Inc. KMI slid 3.2%, and Valero Energy Corp. VLO declined 3% and EQT Corp. EQT was down 0.72%.

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