Oil Prices Slip as Hopes of US-Iran De-escalation Ease Market Fears

Oil prices fell on Monday after climbing to near six-month highs last week, as hopes of easing hostilities between the United States and Iran offered temporary relief to markets. However, continued attacks on Saudi Arabia and persistent risks to energy supplies kept investors cautious.

US West Texas Intermediate crude futures dropped $2.23, or 2.16%, to $101.04 a barrel by 7:26 a.m. Saudi time. Brent crude futures fell $2.21, or 1.89%, to $114.51 a barrel.

Both benchmarks had risen sharply on Friday, settling nearly $3 higher after attacks by Yemen’s Houthi movement in Saudi Arabia intensified concerns about possible supply disruptions. Brent ended the week up 6%, while WTI gained 2.3%.

Diplomatic efforts helped ease some concerns on Monday. Qatari mediators travelled to Tehran on Sunday as part of an initiative to reduce regional tensions in coordination with the United States, an official briefed on the situation said.

Vandana Hari, founder of oil market analysis provider Vanda Insights, said fears of renewed military action in the Middle East had eased but warned that the relief might not last.

Hari said US President Donald Trump had not ruled out market expectations that further strikes against Iran could follow the November 3 midterm elections.

“We therefore expect volatility to remain elevated, with risks still skewed to the upside,” she said.

The diplomatic efforts came as attacks continued over the weekend. The Iran-backed Houthis said they had targeted an airport and oil facilities in Saudi Arabia on Saturday. Saudi authorities reported intercepting additional missiles and drones on Sunday.

The conflict involving the United States, Israel and Iran, which began on February 28, has disrupted commercial shipping through the Strait of Hormuz and the Bab el-Mandeb Strait. The waterways are important routes for global energy shipments, and continued insecurity has heightened concerns about the reliability of oil supplies.

Priyanka Sachdeva, head of market insight at Phillip Nova, said the latest decline appeared to reflect changes in trading positions and efforts to manage risk rather than a significant improvement in supply conditions.

“While supply risks surrounding the Strait of Hormuz remain firmly entrenched, the current pullback appears more reflective of position adjustments and risk management rather than any meaningful improvement in the underlying supply situation,” she said.

Meanwhile, Saudi Arabia and Singapore announced that state-owned oil producer Saudi Aramco would begin storing crude oil in Singapore in the second half of 2027. The arrangement aims to strengthen the company’s regional supply chain.

International Energy Agency chief Fatih Birol also warned that the disruption could have lasting effects. Speaking at an industry event in Singapore on Monday, he said he did not expect energy markets in 2027 to return to their pre-war conditions.

The outlook for oil prices remains uncertain as traders weigh diplomatic progress against the risk of renewed military action and further disruption to energy shipments.