Oil Price Drops Over 6% As U.S.-Iran Pause Eases Supply Concerns

Oil price fell sharply on Monday after the United States paused military strikes against Iran over the weekend, reducing fears of an immediate escalation in the Middle East. The development improved expectations that crude shipments through key regional routes could gradually recover, although shipping activity remained subdued.

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Brent crude share price benchmark futures dropped $6.20, or 6.4%, to $90.58 a barrel by 0620 GMT after briefly falling below the $90 mark during the session. U.S. West Texas Intermediate (WTI) crude price declined $5.80, or 6.5%, to $83.51 a barrel. Both contracts were trading at their lowest levels in nearly a week after recording gains over the previous three weeks.

Diplomatic Pause Weighs On Oil Price

According to Reuters, the decline followed comments from U.S. ambassador to the United Nations Mike Waltz, who said on Fox News Sunday and other U.S. media outlets that President Donald Trump had decided to suspend further military action to provide additional time for diplomatic efforts.

The announcement eased immediate concerns over further disruption to crude supplies from the Middle East. Brent crude price had earlier climbed to $100 a barrel as the conflict affected shipments through the Strait of Hormuz and extended into the Red Sea, limiting exports from Saudi Arabia through the Bab el-Mandeb Strait.

Shipping Activity Still Remains Weak

Despite the pause in hostilities, vessel movement through the Strait of Hormuz has yet to return to normal. Shipping data from Kpler showed that fewer than 10 commodity vessels crossed the waterway each day over the weekend, indicating that shipping companies remain cautious.

The Bab el-Mandeb Strait also witnessed reduced traffic on Sunday after Yemen’s Houthi group launched attacks on Saudi oil facilities along the Red Sea coast. However, shipping activity did continue to some extent, with a third Chinese supertanker successfully exiting through the route.

Supply Risks Continue To Support Crude Market

While the immediate geopolitical outlook has improved, analysts noted that supply concerns have not disappeared. Ongoing risks surrounding shipping routes in the Middle East, along with the Russia-Ukraine conflict, continue to influence the crude market.

UOB analysts said in a research note that prolonged disruptions to global oil supplies could keep oil price supported and maintain upward pressure on inflation. Separately, Ukraine said it carried out strikes on multiple Russian oil facilities over the weekend, adding another layer of uncertainty to global energy markets.

Although the latest diplomatic developments have eased immediate supply concerns, market participants continue to monitor shipping activity and geopolitical developments closely, as any renewed disruption across major export routes could quickly alter the outlook for global crude supplies and oil price movements.