Crude Drops As Markets Bet On Diplomacy
Oil prices fell sharply amid tentative hopes that the United States and Iran may be moving closer to a deal to end the US-Israel war on Iran.
Brent crude, the main global oil benchmark, dropped more than 5% on Sunday as investors reacted to mixed signals from President Donald Trump about the prospects for a permanent end to the conflict.
Brent Slides Below $100
Brent futures for July stood at 97.94 dollars a barrel as of 04:00 GMT. That left prices down about 9% from a month earlier, although crude remains more than a third higher than before the war began.
The drop reflects growing market hopes that a deal could reopen the Strait of Hormuz and release some of the oil supply that has been trapped or disrupted since the start of the conflict.
Japan Stocks Reach Record High
The improved mood also lifted equity markets. Japan’s Nikkei 225 surged more than 3% in morning trading, reaching an all-time high after already closing at a record level on Friday.
The rally shows how strongly investors are responding to any sign that energy disruptions could ease. Lower oil prices reduce inflation pressure and support expectations that central banks may not need to tighten policy as aggressively.
Trump Urges Caution On Deal
Trump said Sunday that negotiations with Tehran were proceeding in an “orderly and constructive manner”, but added that he had instructed officials not to rush into an agreement.
He wrote on Truth Social that both sides must take their time and get the deal right. The comments followed a more optimistic message on Saturday, when he said an agreement had been largely negotiated, including terms to reopen the Strait of Hormuz.
Hormuz Remains The Key Issue
The Strait of Hormuz remains central to the oil market outlook. Iran has effectively blockaded the waterway since the war began in late February, disrupting about one-fifth of global oil trade.
The United States has also maintained a blockade of Iranian ports since mid-April, further complicating commercial shipping in the region. Trump said Sunday that the US blockade would remain in full force until an agreement is reached, certified and signed.
Analysts Warn Supply Is Still Shut In
June Goh, senior oil market analyst at Sparta in Singapore, said the underlying supply picture has not changed. Around 10 million to 11 million barrels per day of crude remain shut in for every day the Strait of Hormuz stays closed.
Markets are expecting a large release of crude once a deal is in place, including roughly 100 million barrels from stranded ships. That expectation has helped push prices lower even before any agreement is finalized.
Recovery Could Take Months
Even if a deal is signed, analysts warn that normal oil flows may not resume immediately. Sparta estimates that it could take three to six months to return to the previous status quo.
That timeline reflects the need to restart production, bring refineries back online and restore normal shipping patterns after months of disruption. For markets, the immediate reaction is relief, but the longer-term outlook still depends on whether diplomacy can produce a durable agreement and whether physical oil flows actually recover.
