Oil prices tumble over 6% as US, Iran suspend hostilities

GLOBAL oil prices dropped sharply by more than 6 percent in early Asian trading on Monday after the United States and Iran paused military attacks, easing fears of an immediate disruption to crude supplies following two weeks of escalating tensions that had pushed Brent crude above $100 per barrel.

As of the time of reporting, West Texas Intermediate (WTI) crude traded at $83.27 per barrel, representing a 6.04 per cent decline, while Brent crude slipped 7.48 per cent to $89.30 per barrel.

The decline followed indications from Washington that it had temporarily suspended its bombing campaign against Iran. Speaking on CBS’ Face the Nation on Sunday, U.S. Ambassador to the United Nations Mike Waltz said the pause was intended to give diplomacy an opportunity, although he noted that additional U.S. military assets were being deployed to the region in case negotiations failed.

Iran also signalled a willingness to stop its attacks. Foreign Ministry spokesperson Esmaeil Baghaei said discussions with an Omani delegation on Friday and Saturday were constructive and had produced some progress. A senior Iranian official, speaking anonymously to Reuters, described Tehran’s approach as ‘attack for attack,’ indicating that Iran would refrain from military action as long as the United States maintained the pause.

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The easing of hostilities prompted investors to lock in profits after weeks of strong gains in oil prices. However, analysts noted that a sustained decline in crude prices will depend on a significant increase in tanker movements and a broader recovery in global shipping activity.

Despite the temporary relief, the underlying risks to oil transportation remain. Until a lasting diplomatic agreement is reached, tanker operators are expected to continue facing the same security concerns that drove freight rates sharply higher over the past two weeks.

Several broader factors also appear to have contributed to the decision to suspend attacks. The latest U.S. air campaign had reportedly exhausted much of its initial list of military targets while consuming substantial quantities of munitions and missile interceptors.

Political considerations in the United States may also have played a role. With the country’s midterm elections about 100 days away and average gasoline prices climbing above $4 per gallon, the Trump administration faces growing domestic pressure over rising fuel costs.

Market participants are expected to remain focused on developments from Washington and Tehran in the coming days. Although the immediate geopolitical risk premium has eased, confidence in shipping through the Strait of Hormuz, and the Red Sea is likely to recover gradually as uncertainty over the conflict persists.