Crude falls after US pauses air strikes on Iran
Oil prices declined sharply on Monday, reaching their lowest levels in more than a week after the United States unexpectedly suspended its airstrike campaign against Iran, raising hopes that diplomatic efforts could help reopen shipping routes through the Strait of Hormuz.
Brent crude futures fell $8.42, or 8.7%, to close at $88.36 per barrel, their lowest level since July 17. US West Texas Intermediate (WTI) crude futures dropped $6.70, or 7.5%, ending the session at $82.61 per barrel, the lowest since July 16.
Markets react to possible diplomatic progress
Oil prices had climbed above $100 per barrel last week as the conflict disrupted crude shipments through the Strait of Hormuz and expanded into the Red Sea, affecting exports from Saudi Arabia, the world’s largest oil exporter.
The disruption threatened Saudi shipments through the Bab el-Mandeb Strait, a key maritime route connecting the Red Sea with global markets, particularly for exports heading toward Asia.
US Ambassador to the United Nations Mike Waltz said that President Donald Trump had decided to pause American attacks to allow additional time for diplomatic discussions.
Trump later said the US was engaged in “good talks” with Iran and that there was a possibility of reaching an agreement, while warning that strong military action could follow if negotiations failed.
Supply risks remain despite ceasefire hopes
Oil prices continued falling during Monday’s session after Saudi Arabia’s air defence systems intercepted drones launched from Iraq. Yemen’s Houthi movement also claimed responsibility for targeting oil supply and transportation infrastructure connected to Saudi Arabia’s Red Sea export hub of Yanbu.
John Evans, an analyst at PVM, said markets appeared eager to find positive developments despite continued uncertainty.
“A stay of military strikes might seem an improvement, but it does not come with any guarantees that oil will soon flow from the area,” Evans said, warning that prices would only continue declining if high costs reduce demand rather than because of temporary diplomatic progress.
Hormuz shipping activity remains heavily restricted
Energy analysts warned that oil markets are likely to remain highly volatile as investors monitor developments around the unofficial ceasefire between the US and Iran.
Alex Hodes, director of energy market strategy at StoneX, said physical oil flows remain constrained despite the pause in fighting.
“Shipping volumes remain heavily depressed after a brief mid-June ceasefire, limiting Middle East exports and forcing longer, costlier reroutes via Suez for Saudi Red Sea cargoes,” Hodes said.
Shipping data from Kpler showed that fewer than 10 commercial vessels passed through the Strait of Hormuz daily over the weekend.
Ole Hvalbye, market analyst at SEB Research, said flows had fallen to around 15% of pre-war levels, compared with normal transportation volumes of roughly 20 million barrels per day of crude, condensate and petroleum products.
“A political pause doesn’t put a single extra barrel on the water right here and now,” Hvalbye said.
Red Sea and Black Sea disruptions continue
Shipping activity through the Bab el-Mandeb Strait also declined after Houthi forces attacked Saudi oil facilities along the Red Sea coast, although a third Chinese supertanker was able to pass through the route.
Meanwhile, Kazakhstan, one of the world’s largest oil producers, has reportedly reduced daily output by more than half after drone attacks forced the closure of Russia’s Black Sea export terminal.
The Caspian Pipeline Consortium later announced that oil loading operations at its Black Sea terminal had resumed, easing some concerns over supply disruptions.
Oil markets remain focused on geopolitics
Despite Monday’s decline, analysts expect continued volatility as markets assess whether diplomatic efforts between the US and Iran can lead to a lasting reduction in tensions and allow energy shipments to recover.
