Price Movement
On Monday, Brent crude futures fell 5.5% to $91.44 per barrel, briefly slipping below $90, while U.S. West Texas Intermediate (WTI) futures dropped 3.1% to $89.31 per barrel, representing a decline of more than 5% in overall oil prices.
Geopolitical Trigger
The price decline followed a pause by the United States in its bombing campaign against Iran after 13 consecutive nights of strikes. An Iranian official told Reuters that Tehran would suspend retaliatory attacks for as long as the U.S. pause remained in effect, although both sides warned they could resume hostilities if diplomatic talks falter.
Diplomatic Outlook
Reports on Friday indicated that China was working to revive stalled peace talks between Washington and Tehran, raising market expectations of a negotiated resolution and prompting investors to unwind the geopolitical risk premium that had lifted crude to multi‑month highs.
Market Commentary
IG senior market analyst Tony Sycamore said that the prospect of a return to the previously agreed memorandum governing the Strait of Hormuz encouraged investors to shed part of the war‑risk premium embedded in oil prices.
Shipping and Supply Risks
Despite the easing of hostilities, traders remained cautious because vessel traffic through the Strait of Hormuz fell over the weekend and movements through the Bab el‑Mandeb Strait slowed after Houthi attacks on Saudi oil facilities. ANZ analysts noted that the market has so far absorbed supply disruptions through lower Chinese crude imports, emergency stock releases, and alternative export routes that allow Saudi crude to bypass the Strait of Hormuz. However, they warned that strategic reserves are being drawn down, commercial inventories are tightening, and risks to shipping in the Red Sea and Bab el‑Mandeb persist, leaving oil prices vulnerable to renewed gains if regional supply disruptions intensify.