Oil prices plunge as US-Iran pause raises hopes for Hormuz reopening

Global oil prices fell sharply on Monday after the United States and Iran paused military strikes over the weekend, easing fears of further disruption to energy supplies from the Middle East and raising hopes for renewed diplomatic engagement.

Brent crude, the international benchmark, dropped by $5.70, or 5.9 per cent, to $91.08 a barrel. US West Texas Intermediate crude declined by $4.80, or 5.4 per cent, to $84.51 a barrel, marking their lowest levels in almost a week.

The decline followed two days without fresh exchanges of fire between Washington and Tehran, encouraging investors to believe that the conflict may be moving towards a diplomatic resolution rather than further military escalation.

The recent hostilities had pushed oil prices sharply higher amid concerns that supplies could be disrupted through the Strait of Hormuz, one of the world’s most important maritime routes for crude exports.

Market sentiment improved as traders anticipated that any easing of tensions could pave the way for a gradual return of commercial shipping through the strategic waterway. However, analysts cautioned that vessel movements are unlikely to recover immediately, as shipping companies remain wary of security risks in the region.

Shipping traffic through the Strait of Hormuz has remained well below normal levels, while attacks affecting routes in the Red Sea have also contributed to supply concerns in recent weeks.

Despite Monday’s steep decline, analysts warned that oil markets remain vulnerable to renewed volatility if diplomatic efforts falter or fighting resumes. They also noted that disruptions linked to the conflict in Ukraine continue to pose risks to global energy supplies.