Oil Prices Retreat as Iran and Israel Pause Hostilities After Trump Appeal

Oil prices fell on Tuesday, giving up most of the gains recorded a day earlier, after Iran and Israel signaled a halt to direct attacks following an appeal from Donald Trump. Despite the pause, both countries warned that military action could resume if tensions escalate again.

Brent crude futures dropped $1.14, or 1.2 percent, to $93.11 a barrel in morning trading, while US West Texas Intermediate crude fell $1.30, or 1.4 percent, to $90 a barrel.

The decline followed a volatile trading session on Monday when oil prices surged by as much as 5 percent. Markets had reacted sharply to renewed Israeli strikes on Iran and attacks linked to the conflict in Lebanon, developments that raised concerns about a broader regional escalation and potential disruptions to global energy supplies.

However, prices retreated after Iran’s armed forces announced that military operations against Israel had ended, easing immediate fears of a wider confrontation.

Market analysts said investors welcomed the temporary reduction in hostilities but remained cautious about the outlook.

Tim Waterer, chief market analyst at KCM Trade, said there was some relief from the latest pause in direct attacks, but investors were still uncertain about whether the ceasefire would hold.

Tony Sycamore, market analyst at IG, said the situation had stopped from escalating further for now, though the wider geopolitical environment remained fragile and a lasting peace agreement had yet to emerge.

The latest pause came after Trump publicly urged both sides to stop military action. Iran and Israel subsequently indicated that attacks had ceased, although Tehran warned it could resume strikes if Israel continued operations against Hezbollah positions in Lebanon.

Israeli Prime Minister Benjamin Netanyahu also signaled that any future Iranian attack would be met with a forceful response.

According to reports, Trump warned Netanyahu that Israel could find itself isolated if it returned to a full-scale conflict with Iran.

The developments have left energy markets focused on whether diplomatic efforts can produce a more durable settlement or whether the current calm represents only a temporary break in fighting.

A major issue in ongoing discussions between Washington and Tehran remains the reopening of the Strait of Hormuz, a critical waterway that previously carried around one-fifth of global oil supplies before disruptions linked to the conflict began earlier this year.

Adding to tensions, the US military said on Monday that its forces disabled an empty oil tanker in the Gulf of Oman after it allegedly attempted to sail to an Iranian port in violation of sanctions and restrictions linked to the ongoing crisis.

With uncertainty still surrounding regional security and energy flows, traders are expected to remain highly sensitive to any signs of renewed military activity or progress in diplomatic negotiations.