Oil Prices Plunge More Than 6% as US-Iran Pause Raises Hopes of De-escalation

Oil prices fell more than 6 per cent on Monday after the United States and Iran paused military strikes over the weekend, raising hopes that diplomatic efforts could help ease the conflict and allow shipping through the Strait of Hormuz to resume.

Brent crude futures fell $6.20, or 6.4 per cent, to $90.58 a barrel by 9:20 a.m. Saudi time after briefly dropping below the key $90 level earlier in the session.

US West Texas Intermediate crude declined $5.80, or 6.5 per cent, to $83.51 a barrel.

Both benchmarks were trading at their lowest levels in almost a week after rising for three consecutive weeks. Brent had previously climbed to $100 a barrel as the conflict disrupted oil shipments through the Strait of Hormuz and spread to the Red Sea, affecting exports from Saudi Arabia to Asia through the Bab el-Mandeb strait.

US Ambassador to the United Nations Mike Waltz told Fox News Sunday and other US media that President Donald Trump had decided to pause US attacks to give diplomacy more time.

“Oil prices fell sharply in early trading as the US and Iran refrained from further military action, offering the first tangible signs of a potential de-escalation in tensions,” ING analysts said in a client note.

The sharp fall in prices came despite signs that shipping activity had not yet returned to normal. Fewer than 10 commodity vessels passed through the Strait of Hormuz each day during the weekend, according to shipping data from Kpler.

Saul Kavonic, an analyst at MST Marquee, said any recovery in shipping flows was likely to be slow and limited because many operators remained concerned about safety.

Ship traffic through the Bab el-Mandeb also fell on Sunday after Yemen’s Houthi movement attacked Saudi oil facilities along the Red Sea coast. A third Chinese supertanker, however, managed to exit through the strategic waterway.

Analysts said oil markets could remain supported if disruptions to crude supplies continue because of shipping risks in the Middle East and the Russia-Ukraine war.

UOB analysts warned that a wider Middle East conflict and attacks on Russian oil infrastructure could keep supply disruptions in place, supporting higher oil prices and creating additional risks for global inflation.

Ukraine said it had struck several Russian oil facilities over the weekend, adding another source of uncertainty for global energy markets as traders assessed whether the pause in US-Iran attacks would lead to a broader improvement in regional security.