Global oil prices plunged on Monday after the United States and Iran paused attacks over the weekend, easing fears of an immediate escalation in the Middle East and raising hopes that diplomatic efforts could restore stability to a crucial oil-shipping route.
Brent crude, the international benchmark, fell by more than 5% in early trading, while US West Texas Intermediate (WTI) also dropped sharply.
At one point, Brent was trading around $91 a barrel after briefly slipping below the psychologically important $90 mark. WTI fell to the mid-$80s.
The decline represents a significant reversal from last week’s surge, when Brent briefly climbed above $100 a barrel as the conflict disrupted oil shipments through the Strait of Hormuz and raised fears of a wider supply crisis.
The Strait of Hormuz, which links the Persian Gulf with the Gulf of Oman, is one of the world’s most important energy corridors.
Any prolonged disruption to shipping through the waterway can quickly affect global crude supplies, freight costs and fuel prices.
The latest market sell-off followed a pause in military attacks by Washington and Tehran after two weeks of hostilities.
US Ambassador to the United Nations Mike Waltz said President Donald Trump had decided to halt US strikes temporarily to give diplomacy more room to work.
Iran has also indicated that it would halt attacks as long as the United States does the same, helping to create a window for negotiations.
The development has encouraged traders to reassess the risk of a prolonged disruption to energy supplies.
Oil markets had previously priced in a substantial geopolitical risk premium because of uncertainty surrounding the Strait of Hormuz. With the prospect of renewed negotiations, some of that premium has rapidly disappeared.
Analysts, however, warn that the sharp decline in prices does not necessarily mean the energy crisis is over.
Shipping through the Strait of Hormuz remains heavily restricted, with fewer than 10 commodity vessels reported to have passed through the waterway each day during the weekend, according to shipping data cited by Reuters.
The Red Sea also remains a concern. Iran-aligned Houthi forces have continued attacks on Saudi oil infrastructure and shipping, threatening another major route used to transport crude and petroleum products between the Middle East and global markets.
Market participants are therefore watching closely for signs that commercial shipping can resume safely.
Even if a ceasefire holds, analysts expect the return of tanker traffic to be gradual because shipping companies may remain reluctant to send vessels through contested waters until they are confident that the security situation has improved.
The fall in crude prices could provide some relief to consumers and businesses if the decline is sustained.
Lower oil prices can reduce pressure on petrol, diesel, aviation fuel and transportation costs, while also helping to ease inflationary pressures in economies heavily dependent on imported energy.
For oil-producing countries, however, a sustained decline could reduce export earnings and government revenues.
Investors are now focused on whether the pause in US-Iran hostilities develops into a broader diplomatic agreement.
If talks make meaningful progress and shipping through the Strait of Hormuz gradually returns to normal, oil prices could face further downward pressure.
But any renewed military strikes, attacks on tankers or prolonged closure of the waterway could quickly reverse the market’s relief and send crude prices higher again.
For now, traders are betting that diplomacy has gained a valuable opening and that the pause in fighting could mark the beginning of a wider de-escalation in the Middle East.
