Ayatollah Ali Khamenei said that a deal was possible if Iran’s nuclear infrastructure was kept intact. His comments came just a few days after both Tehran and Washington denied reports that an interim nuclear deal was close.

But Khameni’s comments reignited fears of a nuclear deal among oil traders, given that it could flood the market with supply as sanctions on Iranian crude exports are lifted.

Oil prices see little relief

Anxiety over increasing supply also came with markets already fretting over sluggish demand and worsening economic conditions. This trend had largely countered a surprise production cut by Saudi Arabia, with crude ending the prior week in red despite a 1.6 million barrels per day supply cut by the world’s largest oil producer.

Brent oil futures fell 1.1% to $73.97 a barrel, while West Texas Intermediate crude futures fell 1.1% to $69.38 a barrel by 22:05 ET (02:05 GMT).

A slew of disappointing economic indicators from major crude consumers U.S. and China weighed on oil prices through recent weeks, playing into fears that weak economic conditions will largely stymie demand for crude this year.

Chinese fuel demand has struggled to reach pre-COVID levels, with an economic rebound in the country appearing to have run out of steam despite the lifting of most restrictive measures earlier this year.

In the U.S., economic growth was seen cooling in recent months amid high inflation and interest rates.

Fed, inflation anxiety also in play

Oil markets were also on edge ahead of more signals on the U.S. economy and monetary policy this week. U.S. consumer inflation data is due on Tuesday, and is expected to factor into a Federal Reserve decision on interest rates on Wednesday.

The Fed is widely expected to keep rates steady after roughly 500 basis points of hikes in the past year. But given that U.S. inflation is still trending well above the central bank’s target range, markets remained wary of any more hawkish moves.

The dollar firmed in Asian trade on Monday ahead of the Fed, also pressuring oil markets by making crude more expensive for international buyers.