Global oil prices fell sharply on Monday after signs of easing tensions between the United States and Iran raised hopes for a return to ceasefire negotiations and the reopening of the Strait of Hormuz, a key global oil shipping route.
The decline followed a pause in military action after 13 days of strikes on Iranian targets. Over the weekend, the United States suspended further attacks, while President Donald Trump’s envoy to the United Nations said Washington was giving diplomatic talks an opportunity to progress.
Iran also announced that it would halt retaliatory attacks against regional neighbours, offering temporary relief to Gulf shipping and the global energy market.
The latest conflict began after Iran attacked ships passing through the Strait of Hormuz, disrupting one of the world’s most important oil transit routes and triggering renewed hostilities between Tehran and Washington.
The crisis later expanded as Iran-backed Houthi rebels in Yemen launched attacks on Saudi vessels in the Bab el-Mandeb Strait, another strategic shipping corridor linking the Red Sea to global markets.
The conflict pushed crude oil prices above $100 per barrel last week, with Brent crude reaching its highest level since May amid fears of supply disruptions.
However, investor sentiment improved after reports confirmed that shipping continued through the Red Sea and diplomatic efforts resumed.
Iran’s Foreign Ministry said discussions with Oman focused on developing common principles and operational mechanisms to ensure the safe passage of vessels through the Strait of Hormuz while respecting the sovereignty of both countries.
Media reports also indicated that Pakistan is working to revive peace negotiations between the United States and Iran following diplomatic efforts initiated by China.
The easing geopolitical tensions triggered a broad sell-off in oil markets.
Brent crude fell by more than 7 per cent at one point during Monday’s trading, briefly dropping below $90 per barrel, while West Texas Intermediate (WTI) also recorded significant losses.
Analysts said the decline reflects growing confidence that both sides are seeking to avoid further escalation that could threaten global energy supplies.
National Australia Bank analyst Sally Auld said recent developments suggest that oil prices above $100 per barrel may be encouraging both countries to pursue de-escalation.
The fall in oil prices also eased concerns over renewed inflationary pressures and the possibility of further interest rate increases, helping to lift global equity markets.
Major stock markets in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Mumbai and Manila closed higher, while London, Paris and Frankfurt also recorded gains at the opening of trading.
Investors are now focusing on upcoming corporate earnings from major technology companies, including Microsoft, Meta, Apple and Amazon, as well as semiconductor firms SK hynix, Samsung and Japan’s Kioxia.
Market participants are also awaiting this week’s US Federal Reserve policy decision, although most analysts expect the central bank to leave interest rates unchanged despite lingering geopolitical risks.
By early Monday trading, West Texas Intermediate was down 6.5 per cent to $83.54 per barrel, while Brent crude fell 6.4 per cent to $90.56 per barrel.
