BY COMFORT OGBONNA
Oil prices fell sharply on Monday after the United States and Iran paused military strikes over the weekend, increasing expectations that diplomatic efforts could reduce tensions and eventually allow shipping activity to recover through the Strait of Hormuz, one of the world’s most important energy routes.
Brent crude futures declined $3.96, or 4.1%, to $92.82 a barrel by 0329 GMT after briefly falling below the key $90 support level during early trading. U.S. West Texas Intermediate crude dropped $4.02, or 4.5%, to $85.29 a barrel.
Both major oil benchmarks were trading at their lowest levels in nearly a week after climbing for three consecutive weeks as concerns over possible disruptions to global energy supplies pushed prices higher.
Brent crude had previously approached $100 a barrel as the conflict disrupted oil shipments through the Strait of Hormuz and expanded into the Red Sea region. The wider instability threatened exports from Saudi Arabia, the world’s largest oil exporter, as shipping activity through the Bab el-Mandeb Strait faced additional risks.
The decline in prices followed reports that the United States had temporarily halted military strikes against Iran to create more room for diplomatic discussions. U.S. officials said the pause was intended to provide an opportunity for negotiations and reduce the risk of further escalation.
Market analysts said the sharp drop in oil prices reflected investor optimism that the conflict could move toward a less aggressive phase, although uncertainty remains over whether the pause will lead to a lasting agreement.
“The market is reacting strongly to the possibility of reduced tensions,” analysts said, noting that traders had been waiting for signs that could ease concerns about a prolonged disruption to energy supplies.
Despite the pause in fighting, shipping activity through the Strait of Hormuz remained limited over the weekend. Data showed that fewer than 10 commercial vessels carrying commodities passed through the strategic waterway each day, indicating that many shipping companies remain cautious about operating in the area.
Analysts warned that any recovery in shipping flows through the Strait of Hormuz is likely to happen gradually. Many operators are expected to wait for clearer evidence that conditions have stabilized before increasing activity and sending additional vessels into the region.
The Red Sea also remained a concern after Yemen’s Iran-aligned Houthi movement launched attacks on Saudi oil facilities along the coast. The attacks contributed to a decline in ship traffic through the Bab el-Mandeb Strait, another major route for global energy transportation.
However, some shipping activity continued despite the risks, with at least one large Chinese oil tanker successfully passing through the Bab el-Mandeb route.
While the immediate market reaction was driven by hopes of de-escalation, some analysts cautioned that oil prices could remain supported if supply disruptions continue. Ongoing risks in the Middle East, combined with the impact of the Russia-Ukraine war on energy infrastructure, continue to create uncertainty for global oil markets.
Analysts said prolonged disruptions to crude supplies could keep prices elevated and increase pressure on inflation worldwide, particularly if attacks on energy facilities and shipping routes continue.
The conflict has already highlighted the vulnerability of global energy networks, with traders closely monitoring developments in major oil-producing regions and key maritime corridors.
Ukraine also reported strikes against several Russian oil facilities over the weekend, adding another layer of uncertainty to global energy markets as investors assess the potential impact on future supply levels.
Although oil prices eased following the U.S.-Iran pause, market participants remain cautious, with the direction of crude prices likely to depend on whether diplomatic efforts succeed and whether major shipping routes can return to normal operations.
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