Oil prices fell more than 6% on Monday after the United States and Iran paused a two-week exchange of attacks, raising expectations that diplomatic efforts could ease tensions and help restore shipping activity through the Strait of Hormuz.
Brent crude futures dropped $6.20, or 6.4%, to $90.58 a barrel by 06:20 GMT, after briefly falling below the key $90 level earlier in the session. U.S. West Texas Intermediate (WTI) crude futures declined $5.80, or 6.5%, to $83.51 a barrel.
Both benchmarks were trading at their lowest levels in about a week after gaining for three consecutive weeks amid concerns that escalating regional tensions could threaten global energy supplies.
Brent crude had earlier climbed to $100 a barrel as the conflict spread to the Red Sea, disrupting Saudi oil shipments to Asia through the Bab al-Mandab Strait.
U.S. Ambassador to the United Nations Mike Waltz said President Donald Trump decided to temporarily halt attacks to provide additional time for diplomatic efforts.
Analysts at ING said oil prices dropped sharply in early trading as reduced military activity between the United States and Iran provided the first signs of a possible de-escalation. They noted that the market reaction reflected strong demand for positive developments that could ease supply concerns.
Despite the pause in attacks, shipping activity through key waterways remains limited. Data from Kpler showed that fewer than 10 cargo ships passed through the Strait of Hormuz daily earlier this week, while traffic through the Bab al-Mandab Strait declined after Yemen’s Houthi group carried out attacks on Saudi oil facilities in the Red Sea.
A third Chinese supertanker also managed to pass through the Strait of Hormuz. However, analysts said oil prices could continue to receive support if supply disruptions persist due to shipping risks in the Middle East and the ongoing Russia-Ukraine war.
Ukraine also reported targeting several oil facilities in Russia over the weekend, adding further uncertainty to global energy markets.
