Investing.com– Oil prices fell in early Asian trade on Tuesday, extending losses from the prior session as the prospect of an Israel-Lebanon ceasefire saw traders pricing in a smaller risk premium for crude.

A spike in the dollar, after U.S. president-elect Donald Trump threatened to impose import tariffs on China, Canada, and Mexico, also pressured oil prices. 

expiring in January fell 0.3% to $72.80 a barrel, while fell 0.3% to $68.33 a barrel by 20:14 ET (01:14 GMT). 

Oil pressured by reports Israel-Hezbollah ceasefire is close 

Oil prices tumbled on Monday after several media reports said Israel and Lebanese militant group Hezbollah were close to reaching a U.S.-brokered ceasefire deal.

U.S. President Joe Biden and French President Emmanuel Macron are set to announce the ceasefire “imminently,” Reuters reported.

A ceasefire between the two marks a major de-escalation in the long-running Middle East conflict, and lessens the risk of oil supply disruptions stemming from the conflict.

Reports also suggested that Biden was pushing for a ceasefire in Gaza. 

Still, reports of the ceasefire were undermined by both Israel and Hezbollah launching strikes against each other over the weekend. 

Oil’s risk premium also still remained in play following an escalation in Russia-Ukraine tensions over the past week, after Moscow threatened nuclear retaliation for Kyiv’s use of Western-made long-range missiles in the war. 

Dollar surges after Trump tariff threat 

The rose sharply on Tuesday, pressuring oil prices after Trump threatened to impose a 10% trade tariff on China over the alleged inflow of illicit drugs into the U.S.

Trump also threatened a 25% import tariff on Mexico and Canada over claims of illegal immigrants entering the U.S. through the two countries. 

The dollar shot up on the prospect of more U.S. protectionist policies, coming back in sight of a two-year high and pressuring crude prices. A stronger dollar makes oil more expensive for international buyers, denting demand.

The prospect of higher trade tariffs on China, which is the world’s biggest oil importer, also weighed on oil, given that they herald more economic pressure on Beijing. 

Beijing could also impose retaliatory tariffs against the U.S., ramping up a trade war between the world’s two largest economies and potentially disrupting global trade.