Oil prices tumble after US and Iran halt strikes, easing fears over Strait of Hormuz shipping

Oil prices fell sharply on Monday after the United States and Iran paused military strikes over the weekend, ending two weeks of attacks and raising hopes that diplomacy could de escalate the conflict and allow shipping through the Strait of Hormuz to resume.

Brent crude futures dropped by around 5.9 percent to just above 91 dollars a barrel, briefly slipping below the closely watched 90 dollar mark earlier in the session. US West Texas Intermediate crude fell roughly 5.4 percent to settle near 84.50 dollars a barrel. Both benchmarks touched their lowest levels in almost a week, reversing three straight weeks of gains driven by the conflict.

Brent had climbed as high as 100 dollars a barrel as fighting disrupted oil shipments through the Strait of Hormuz and spread to the Red Sea, complicating exports from Saudi Arabia, the world’s largest oil exporter, through the Bab el Mandeb strait toward Asian markets.

US Ambassador to the United Nations Mike Waltz said President Donald Trump had opted to pause American strikes to give diplomatic efforts more room to work, a message he delivered across several US television appearances Sunday.

Market analysts remained cautious despite the price drop. PVM analyst John Evans said markets continue to search for encouraging signals from a region that has offered little reassurance so far, and cautioned that a pause in strikes carries no guarantee that oil shipments will resume quickly. He said prices are more likely to keep falling if elevated costs curb demand rather than because of a fragile ceasefire.

Shipping data from Kpler showed fewer than ten commodity vessels passed through the Strait of Hormuz per day over the weekend. MST Marquee analyst Saul Kavonic said any recovery in traffic through the strait will likely be gradual and incomplete, since many shipping operators remain cautious and will want stronger safety assurances before sending empty vessels back into the waterway.

Traffic through the Bab el Mandeb strait also declined Sunday after Yemen’s Houthi movement struck Saudi oil facilities along the Red Sea coast, though one additional Chinese supertanker managed to exit through the strait. Analysts at Societe Generale estimate that every month the Red Sea situation remains unresolved could add at least 10 dollars to the price of a barrel.

Some analysts expect prices to stay supported if supply disruptions continue across the Middle East and in connection with Russia’s war in Ukraine. Analysts at UOB noted that the widening Middle East conflict, combined with Ukrainian drone strikes on Russian ships and refineries, could sustain supply disruptions that keep oil prices elevated and add upward pressure to global inflation. Ukraine said it struck several Russian oil facilities over the weekend as part of that ongoing campaign.

The volatility underscores how closely global energy markets remain tied to geopolitical developments in the Middle East, where even temporary pauses in fighting can trigger significant price swings as traders weigh the likelihood of a lasting resolution against the risk of renewed escalation.