Oil Prices Fall As U.S., Iran Pause Attacks

Oil prices fell sharply on hopes that a pause in attacks between the United States and Iran could help de-escalate the conflict in the Middle East, which had disrupted oil supplies and pushed up fuel prices worldwide.

As of Monday, Brent crude, the global benchmark, fell more than 9% to as low as $87.59 a barrel, reversing last week’s rally when prices climbed above $100 a barrel.

The decline followed comments by the U.S. ambassador to the United Nations, who said attacks on Iran had been suspended for a second consecutive night to give diplomatic talks “some space.”

An Iranian military spokesperson said on Sunday that Tehran had also halted what it described as retaliatory attacks in the region.

The conflict triggered a sharp rise in oil prices after it led to the effective closure of the Strait of Hormuz, a critical shipping lane through which about 20% of the world’s oil and liquefied natural gas (LNG) supplies typically pass.

Oil prices retreated to around $70 a barrel after Iran and the United States signed a memorandum of understanding in June to suspend military operations and reopen the strait.

However, the collapse of the ceasefire earlier this month renewed concerns over global energy supplies, sending oil prices higher once again.

Last Thursday, Brent crude rose above $100 a barrel for the first time since May. Prices were also supported by attacks on oil tankers in the Red Sea by Yemen’s Houthi militia, raising concerns over another key export route used by Saudi Arabia to bypass the Strait of Hormuz.

“As the conflict continues to evolve, markets remain cautious given the twists and turns,” said Susannah Streeter, chief investment strategist at Wealth Club.

Despite the sharp decline in crude prices, “there is still significant uncertainty baked into these prices and a reticence about whether negotiations will lead to a lasting breakthrough,” she said.