Oil Prices Drop 4% as US, Iran Pause Fighting Over Weekend

Oil prices fell sharply Monday after the United States and Iran paused military strikes over the weekend following two weeks of attacks, raising hopes for a diplomatic resolution that could ease shipping disruptions through the Strait of Hormuz.

Prices Retreat From Recent Highs

Brent crude futures dropped $3.96, or 4.1%, to $92.82, briefly slipping below the $90 support level earlier in the session.

US West Texas Intermediate crude fell $4.02, or 5%, to $84.29 a barrel. Both benchmarks hit their lowest levels in nearly a week after three consecutive weeks of gains, with Brent having reached $100 per barrel as the conflict spread to the Red Sea and disrupted Saudi exports through the Bab el-Mandeb strait.

Shipping Traffic Remains Cautious

Despite the pause, fewer than 10 commodity vessels passed through the Strait of Hormuz daily over the weekend.Any recovery in traffic will likely be slow, as shippers remain wary of safety risks before committing more vessels to the route. Traffic through the Bab el-Mandeb strait also declined Sunday after Houthi attacks on Saudi oil facilities, though one Chinese supertanker carrying Saudi crude did exit through the strait.

Analysts Warn Risks Remain

UOB analysts cautioned that sustained supply disruption from the widening Middle East conflict and the Russia-Ukraine war could keep oil prices elevated and add upward pressure on global inflation.