Crude oil drops sharply as US-Iran pause eases immediate supply concerns

Crude oil prices fell sharply on Monday after posting strong gains for three consecutive weeks, as a temporary pause in military action between the US and Iran over the weekend raised hopes that diplomatic efforts could help ease regional tensions and eventually restore shipping through the Strait of Hormuz.

At the time of reporting, Brent crude was trading at $92.68/bbl, down $4.10 (4.24%), while WTI crude declined $4.07 (4.56%) to $85.24/bbl. Both benchmarks dropped to their lowest levels in nearly a week as concerns over immediate supply disruptions eased.

The latest decline followed Friday's sharp losses, when Brent settled at $96.78/bbl, down $3.91, and WTI closed at $89.31/bbl, falling $3.88. Just days earlier, Brent had climbed above the $100/bbl mark after escalating conflict disrupted crude shipments through the Strait of Hormuz and affected exports from Saudi Arabia via the Bab el-Mandeb Strait.

Market sentiment improved after the United States announced a temporary halt to military strikes to provide more time for diplomatic negotiations. The development strengthened expectations that a broader agreement could reduce geopolitical risks and help stabilize oil supplies. Analysts believe that establishing a secure framework for vessel movement through the Strait of Hormuz would be a key step toward restoring confidence in regional shipping.

Despite the improved outlook, supply chain disruptions remain significant. Tanker traffic through the Strait of Hormuz continued to operate well below normal levels over the weekend, while ongoing attacks by Yemen's Houthi forces further limited vessel movements through the Bab el-Mandeb Strait.

Market analysts cautioned that even if diplomatic progress continues, any recovery in regional oil flows is likely to be gradual, as shipping companies are expected to remain cautious until security conditions improve and safe navigation is fully restored.

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