Investing.com — Oil prices fell sharply on Monday, a welcome reprieve for global markets after having surged about 20% in two weeks. The slide was sparked by the U.S. and Iran pausing strikes against each other, wiping out much of last week’s war premium that had briefly pushed Brent over $100 a barrel.
At 14:45 ET (18:45 GMT), expiring in October, the global oil benchmark, had slumped 6.5% to $85.67 a barrel, while expiring in September tumbled 7.8% to $82.32 a barrel. The former was coming off a 20.6% advance over a two-week span, while the latter a 19.2% climb.
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Trump says there is a ’chance’ Iran deal could be made
Brent temporarily crested $100 a barrel last week after the Iran conflict threatened to widen beyond the Strait of Hormuz to the Red Sea, potentially further disrupting crude exports from the Middle East.
But prices retreated after Washington paused its bombing campaign following 13 consecutive nights of strikes. The New York Times on Friday reported that President Donald Trump had halted plans to sharply escalate U.S. military operations in Iran after meeting with his top advisers and senior members of the administration, citing U.S. officials. The decision was driven by dwindling Pentagon stockpiles of air defenses.
An Iranian official, meanwhile, told Reuters that Tehran would suspend retaliatory attacks as long as the U.S. pause remained in place. However, both sides have warned they remain prepared to resume military action if negotiations break down.
“A thumping drop in the price of oil, all the way back to $90 a barrel, is helping get global stock markets off to a good start to the week, as the U.S. and Iran pause hostilities once more amid efforts from Oman to broker a deal over the vexed issue of shipping passage through the Strait of Hormuz,” Russ Mould, investment director at AJ Bell, said.
“Brent crude had got back to $100 a barrel late last week, as Washington and Tehran exchanged fresh military strikes, but the Omani initiative gives investors fresh hope that a lasting agreement between America and Iran is within reach. Ever since the initial peace deal on (April 8), markets’ core view has been that military escalation had ended, with the result that de-escalation was next and a settlement the ultimate conclusion,” he said.
“That in turn underpinned expectations for a retreat in oil back to the $70-a-barrel mark, where it lay before the initial American and Israeli strikes in late February,” Mould added.
The latest fighting erupted this month after Iran attacked commercial ships in and around the Strait of Hormuz, leading to a collapse in an interim peace deal inked between the two sides in June. Supply disruption concerns were exacerbated after Iran-backed Houthis targeted Saudi tankers in another vital waterway, the Bab el-Mandeb Strait.
The U.S. Ambassador to the United Nations, Mike Waltz, on Sunday told Fox News that talks with Iran were “ongoing” and were “happening at every level.”
“We’ve pretty much destroyed their military. They want to meet, and we’re meeting. We’ll see what happens. There’s a chance we could make a deal. Without what we did, they wouldn’t even be talking to us,” Trump told reporters on Monday.
“I have plenty of time…There’s a good chance that something could happen — and if it does, good. If it doesn’t, we go back to what we were doing two days ago,” the president added.
Shipping disruptions keep supply concerns alive
Despite early signs of easing in hostilities, shipping disruptions persisted. Fewer commodity vessels transited the Strait of Hormuz each day over the weekend, while traffic through the Bab el-Mandeb Strait – a vital conduit linking the Red Sea and the Gulf of Aden – also slowed after Houthi attacks on Saudi oil facilities.
“Maritime traffic continues to navigate two strategically vital chokepoints, but the risk profile is evolving differently across each. The Strait of Hormuz recorded just 29 verified crossings between (Friday and Sunday), with routing uncertainty persisting. Bab el-Mandeb, meanwhile, saw 100 verified crossings and largely stable daily activity, despite ongoing regional security concerns,” Kpler said.
“Several vessels that had previously reversed course later completed their transits, indicating that operators are increasingly making route decisions based on real time risk assessments rather than broad avoidance. With no sign of a lasting regional stabilization, vessel behavior may prove a more important indicator than headline transit volumes,” the shipping tracker added.
Roushni Nair and Scott Kanowsky contributed to this article