Oil prices fell sharply on Monday after the United States and Iran paused military strikes over the weekend, easing fears of a prolonged disruption to global crude supplies and raising hopes that diplomacy could help calm tensions in the Middle East.
Brent crude fell $5.70, or about 5.9 percent, to $91.08 a barrel by 0804 GMT after briefly dropping below the $90 mark earlier in the session. US West Texas Intermediate (WTI) crude declined $4.80, or around 5.4 percent, to $84.51 a barrel. The drop pushed both benchmarks to their lowest levels in nearly a week, following three consecutive weeks of gains fuelled by concerns over supply disruptions.
Oil prices had surged close to $100 a barrel after the conflict disrupted shipments through the Strait of Hormuz and later affected exports through the Bab el-Mandeb strait in the Red Sea, key routes for global energy trade.
Market sentiment improved after US ambassador to the United Nations Mike Waltz said President Donald Trump had decided to pause further attacks to allow more time for diplomatic efforts.
Despite the sharp decline, analysts cautioned that risks to oil supplies remain. PVM analyst John Evans said the temporary pause in military action does not guarantee that oil exports will quickly return to normal, adding that prices are more likely to ease if high energy costs weaken demand rather than because of short-lived ceasefires.
Shipping data from Kpler showed fewer than 10 commodity vessels passed through the Strait of Hormuz each day over the weekend, highlighting continued caution among shipping companies.
MST Marquee analyst Saul Kavonic said any increase in vessel traffic through the Strait of Hormuz is expected to be gradual, as operators will want stronger assurances that conditions are safe before resuming normal operations.
Meanwhile, tensions remain in the Red Sea after Yemen’s Houthis attacked Saudi oil facilities. Analysts at Societe Generale estimate that every month without a resolution to Red Sea disruptions could add at least $10 a barrel to oil prices. UOB analysts also warned that continued supply risks in the Middle East and Ukraine could keep oil prices elevated and add to global inflation pressures.
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