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Oil pares losses after US exits Iran deal, dollar gains

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Crude prices pared losses that earlier on Tuesday ran as deep as 4 per cent after US President Donald Trump said the United States will withdraw from the Iran nuclear deal, while the dollar edged off fresh 2018 highs.

[NEW YORK] Crude prices pared losses that earlier on Tuesday ran as deep as 4 per cent after US President Donald Trump said the United States will withdraw from the Iran nuclear deal, while the dollar edged off fresh 2018 highs.

Brent futures, the global crude benchmark, briefly turned positive after Mr Trump announced the US withdrawal from the 2015 international agreement aimed at stopping Iran from obtaining a nuclear bomb.

Mr Trump said the United States was reimposing the "highest level of economic sanctions" on Iran, but he did not provide details.

Oil prices plunged earlier as markets were rattled by media reports on doubts of whether Mr Trump would withdraw from the Iran nuclear deal as most had expected.

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US crude settled down US$1.67 at US$69.06 per barrel and Brent settled down US$1.32 at US$74.85. Both contracts continued to pare losses in post trade.

It was the busiest day in US front-month contracts since August, and for Brent the busiest in almost a month.

Oil prices had been supported by expectations that Mr Trump would pull out of the deal, which could crimp Iranian crude exports and feed geopolitical tensions in the Middle East, home to one-third of the global daily oil supply.

"Trump's announcement had been baked into the cake in recent days, hence we saw prices selling off today given the air of certainty surrounding it," said Matt Smith, director of commodity research at ClipperData.

The dollar advanced to new highs for 2018 against a basket of six trading currencies on worries about political turmoil in Italy but later pared gains on the US decision to withdraw from the Iran deal.

Commodity-linked and emerging market currencies slid on worries about the US withdrawal, which would curb risk appetite in financial markets.

"Overall it doesn't change the story on dollar strength,"said John Doyle, vice president of dealing and trading at Tempus in Washington.

The dollar index was last up 0.38 per cent at 93.105. The euro slid 0.49 pe cent to US$1.1861, after earlier hitting US$1.1836, its weakest level since late December.

The Japanese yen was little changed against the dollar at 109.06 yen.

REUTERS