Oil prices fell sharply on Monday. The drop came as the United States signalled progress towards a deal with Iran to reopen the Strait of Hormuz. Brent crude led the retreat as traders unwound weeks of war-driven risk premium. According to The Malaysian Reserve, the market moved quickly once a diplomatic path looked credible.
Brent crude, the global benchmark, fell as much as 5.2 per cent to $98.12 a barrel. US West Texas Intermediate traded near $92. The declines followed a series of social-media posts by President Donald Trump. He said Washington would not rush into a deal that was not yet fully negotiated. Senior US officials indicated that any final approval could still take several days. Trump also said the American blockade of the Strait of Hormuz would remain in place until an agreement was complete. Trading volumes were expected to be thinner than usual, with public holidays in both the United States and the United Kingdom keeping some desks empty.
The stakes for global energy markets are large. In peacetime the Strait of Hormuz carries around a fifth of the world’s oil and liquefied natural gas. The current crisis began in February when the United States and Israel attacked Iran. The conflict spread quickly across the Gulf. It forced producers to shut in millions of barrels of daily crude supply. The waterway has since faced a double blockade imposed by both Tehran and Washington. A full reopening would bring relief to major Asian importers including China, Japan and South Korea. It would also begin to ease the oil prices that have driven fuel costs higher across much of the world.
Analysts said the sell-off reflected a rapid repricing of risk rather than a confirmed resolution. “A lot of oil was trading on worst case assumptions for weeks,” said Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP. “But once it became clear talks were still alive and escalation wasn’t accelerating, a chunk of that fear premium comes out pretty fast.” Prices had climbed for weeks on fears that the strait could stay closed for months. Monday’s retreat showed how quickly that premium can unwind when diplomacy gains traction. The message for traders is that sentiment, not fresh barrels, drove the move. Physical supply through Hormuz has not yet changed.
What a Hormuz deal means for oil prices
Significant risks still cloud the outlook. Iran’s Tasnim news agency said the draft agreement could still collapse. It accused the United States of obstructing key clauses, including a demand that Iranian assets be unfrozen. The fate of Iran’s nuclear programme also remains unresolved. The war has pushed average US gasoline prices to their highest since 2022. That has sharpened the political pressure on Trump to end the conflict before November’s midterm elections. Kevin Hassett, the White House chief economic adviser, said energy prices should fall once a deal is signed. He told Fox News that cheaper energy could open room for the Federal Reserve to cut interest rates. Much still depends on whether the two sides can bridge their differences over the nuclear programme and the unfreezing of Iranian assets. Until the terms are signed, oil prices remain tied to a negotiation that neither side has closed.
SOURCES: The Malaysian Reserve: Oil drops as US touts progress on deal toward reopening Strait of Hormuz | Fortune / Bloomberg: Oil drops as US says deal with Iran and Hormuz reopening is near | CNBC: A timeline of how the Iran war shook oil prices
This article was drafted by URUS AI’s editorial system and reviewed by our editorial team. Source links are provided above.