Lead

Oil prices fell sharply on Monday after the United States and Iran paused strikes over the weekend, raising hopes of a diplomatic solution that could de-escalate the conflict and allow shipping to resume in the Strait of Hormuz. The decline marked a sharp turnaround from last week, when Brent crude had risen above $100 a barrel.

Coverage comparison

Reports on the extent of the price drop varied. The BBC reported that oil prices sank more than 9% on Monday, with Brent crude dipping below $88 a barrel. Dawn reported a fall of around 6%, with Brent futures at $90.93 a barrel, while another Dawn report put the decline at more than 6%, with Brent at $90.58. The Guardian reported a fall of more than 5%, with Brent at $91.68 a barrel.

The variation reflects different times of day and trading sessions. For example, one Dawn report noted that Brent had fallen as low as $87.55 earlier in the session, while another said it had briefly slipped under the key support level of $90.

US West Texas Intermediate crude also fell: Dawn reported it at $84.33 a barrel in one report and $83.51 in another.

Key claims

  • Oil prices fell between 5% and 9% on Monday, depending on the time of day and the report.
  • Both the US and Iran paused strikes over the weekend after two weeks of attacks, with the US ambassador to the UN, Mike Waltz, saying that President Donald Trump had decided to pause US attacks to allow more time for diplomacy.
  • Iran said on Sunday it would pause "retaliatory" attacks against US allies in the region.
  • Shipping traffic through the Strait of Hormuz remains disrupted: fewer than 10 commodity vessels passed through the strait daily during the weekend, according to shipping data from Kpler.
  • The conflict has also spilled over into the Red Sea, where Iran-aligned Houthi forces have attacked Saudi oil installations, and Saudi Arabia has intercepted drones launched from Iraq targeting its oil facilities.
  • The conflict between the US and Iran has pushed up fuel costs in many countries, which can have knock-on effects on inflation.

Perspectives

The pause in attacks has been presented by both sides as an opportunity for diplomacy, but analysts remain cautious.

Jim Reid of Deutsche Bank said that while the pause is not a formal ceasefire, both sides have presented it as "an opportunity for diplomacy."

Susannah Streeter, chief investment strategist at Wealth Club, said markets were remaining "cautious given the twists and turns during this conflict." Despite the sharp fall in crude, "there is still significant uncertainty baked into these prices and a reticence about whether negotiations will lead to a lasting breakthrough," she added.

PVM analyst John Evans said: "The market seems to be forever seeking good news from an arena that really is not providing any." He added: "A stay of military strikes might seem an improvement, but it does not come with any guarantees that oil will soon flow from the area… prices will only continue lower if high prices once again dent demand, not questionable mini-ceasefires."

ING analysts said in a client note: "Oil prices fell sharply in early trading as the US and Iran refrained from further military action, offering the first tangible signs of a potential de-escalation in tensions." They added: "The price action in oil this morning clearly reflects the market's desperation for positive news."

MST Marquee analyst Saul Kavonic said any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring more empty ships into the strait.

US officials, including UN ambassador Mike Waltz, have stressed that all military options remain on the table and that President Trump is simply giving negotiations more space.