Global oil prices dropped sharply on Monday after signs of easing tensions between the United States and Iran raised hopes that diplomatic talks could resume and shipping through the strategic Strait of Hormuz would remain uninterrupted.
The decline came after both countries appeared to scale back hostilities following nearly two weeks of military exchanges, giving investors renewed confidence that the conflict may not escalate further.
Brent crude fell by more than 5% to trade around $92 per barrel, while West Texas Intermediate (WTI) dropped over 5% to about $84.45 per barrel.
The market reacted positively after the United States paused further strikes over the weekend. President Donald Trump’s envoy to the United Nations said the administration was “giving talks some space,” signalling a possible return to diplomacy.
Iran also announced it would halt retaliatory attacks on neighbouring countries, offering temporary relief to Gulf shipping operations and the global oil market.
The latest conflict had disrupted earlier ceasefire efforts after Iran reportedly targeted vessels passing through the Strait of Hormuz, one of the world’s most important oil transit routes. The crisis later spread beyond the Gulf, with Iran-backed Houthi fighters in Yemen launching attacks on Saudi vessels in the Bab al-Mandeb Strait, another vital shipping corridor.
The escalating tensions had pushed Brent crude above $100 per barrel last week for the first time since May, sparking fears of higher fuel costs and renewed inflation around the world.
However, optimism returned after Iran confirmed progress in discussions with Oman on improving the management of the Strait of Hormuz.
“The discussions focused on common principles and operational mechanisms for ensuring the safe passage of shipping through the strait while respecting the sovereign rights of the two states,” Iran’s Foreign Ministry spokesman Esmaeil Baqaei said.
Reports also suggested that Pakistan, with support from China, is exploring efforts to revive peace talks between Washington and Tehran.
The easing geopolitical tensions also boosted investor confidence in global stock markets, although concerns remain over heavy spending by major technology companies on artificial intelligence.
Investors are now closely watching upcoming earnings reports from major firms including Microsoft, Apple, Amazon, Meta, Samsung and SK hynix, while attention is also turning to this week’s US Federal Reserve policy meeting.
Analysts expect the central bank to keep interest rates unchanged for now, although many believe further tightening could still happen before the end of the year.
Despite Monday’s decline, analysts say oil prices will likely remain sensitive to any fresh developments involving the United States, Iran and the security of key global shipping routes.
Source: AFP.
