Global oil prices fell 5 percent in early Asian trading on Monday after the United States and Iran suspended military attacks, easing fears of an immediate disruption to Middle East crude supplies following two weeks of conflict that had pushed Brent crude above $100 per barrel.
At the time of writing, Brent crude was trading at $92.04 per barrel, down 5.15 percent, while U.S. benchmark West Texas Intermediate (WTI) fell 5.39 percent to $84.76 per barrel.
The sharp decline followed signals from Washington and Tehran that both sides were pausing hostilities to create room for diplomacy, prompting traders to lock in profits after crude prices surged nearly 20 percent over the past fortnight.
The US announced on Friday that it was temporarily suspending its bombing campaign against Iran.
Speaking to Face the Nation on Sunday, Mike Waltz, US Ambassador to the United Nations, said the pause was intended to “give diplomacy some space,” while stressing that additional U.S. military assets were being deployed to the region should negotiations fail.
Iran also indicated it would halt attacks for as long as the United States refrains from military action.
Esmaeil Baghaei, Foreign Ministry spokesperson, described recent talks with an Omani delegation as “constructive” and said progress had been made.
An Iranian official, speaking anonymously to Reuters, said Tehran’s approach was “attack for attack”, signalling that its restraint would depend on continued U.S. restraint.
The easing of tensions triggered broad-based selling in oil markets after weeks of relentless buying driven by fears that the conflict could disrupt supplies through the Strait of Hormuz and the Red Sea, two of the world’s most important energy shipping routes.
Analysts, however, cautioned that the decline in oil prices may prove temporary unless tanker traffic through the region recovers significantly.
They noted that shipping companies remain cautious after freight rates soared during the conflict, with vessel operators still facing elevated security risks despite the temporary halt in hostilities.
Market participants also pointed to other factors behind Washington’s decision to pause military operations, including the depletion of initial military targets, heavy consumption of munitions and missile interceptors, and growing domestic political pressure ahead of the U.S. midterm elections.
With the national average price of gasoline in the US remaining above $4 per gallon, higher fuel costs have become an increasingly sensitive political issue for President Donald Trump.
Analysts said oil markets are likely to remain highly volatile in the coming days as traders monitor diplomatic developments between Washington and Tehran.
