Oil prices tumbled sharply on Monday after the United States and Iran held back from launching fresh strikes over the weekend, raising hopes that diplomacy could ease tensions in the Middle East and gradually restore shipping through the Strait of Hormuz.Brent crude futures were down $4.37, or 4.52%, at $92.41 a barrel after slipping 5.05% earlier. US West Texas Intermediate (WTI) crude was also 5.23% down before trading $4.30, or 4.81%, lower at $85.01 a barrel around 7:15 am. Both benchmark contracts traded at their lowest levels in nearly a week, retreating after three consecutive weeks of gains.In early trading on Sunday, Brent crude for September delivery fell 4.9% to $92.02 a barrel after reopening, extending a 3.9% decline recorded on Friday.
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Benchmark US crude for September delivery dropped 5.6% to $84.34 after falling 3.1% in the previous session. Meanwhile, Brent crude for October delivery, now the most actively traded contract, declined 4.6% to $87.48.The decline came after the US and Iran refrained from carrying out military strikes in the Persian Gulf for a second straight day. The pause in hostilities followed two weeks of attacks and fuelled hopes that a diplomatic solution could help de-escalate the conflict.US ambassador to the United Nations Mike Waltz told Fox News Sunday and other US media that Donald Trump had decided to pause US attacks to allow more time for diplomacy.“Hopes are rising that a genuine diplomatic path may be opening,” IG Markets analyst Tony Sycamore said in a note.“A return to the 14-point MOU (memorandum of understanding) with a little more clarity around control of the Strait of Hormuz would be a solid starting point.”Brent crude had climbed as high as $100 a barrel during the recent escalation, while it briefly touched $102 last week, its highest level since May and around $30 above the most actively traded Brent contract earlier in the month. The surge was driven by intensified fighting in the Middle East and concerns that a wider conflict would further disrupt global crude supplies.Shipping disruptions continueDespite the pause in attacks, shipping through key trade routes remained subdued.Shipping data from Kpler showed that fewer than 10 commodity vessels passed through the Strait of Hormuz each day over the weekend. Traffic through the Bab el-Mandeb Strait also declined on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker managed to exit through the waterway.The Strait of Hormuz has remained the focal point for oil markets since the US and Israel attacked Iran in late February. Around a fifth of the world’s oil typically passes through the narrow waterway connecting the Persian Gulf to global markets, but the conflict has largely halted shipping traffic. Oil producers have sought alternative routes, though those have also come under pressure following attacks on Saudi oil tankers using the Red Sea.Although oil prices have retreated from last week’s highs, uncertainty continues to linger over the conflict and its impact on energy markets. However, even with this steep rise, prices continue to be lower than the $126 per barrel mark reached earlier during the conflict.
