Key facts
- Oil prices plunged over 5% as the U.S. and Iran halted attacks, easing supply disruption fears.
- WTI crude traded at $84.47 and Brent crude at $91.80 following the de-escalation.
- The U.S. paused air strikes against Iran, signaling a potential diplomatic solution.
- Iran indicated it would suspend attacks as long as the U.S. does.
- Despite the pause, risks in key shipping chokepoints like the Strait of Hormuz and Red Sea persist.
Oil prices plunged more than 5% in early Asian trade on Monday as the U.S. and Iran halted attacks after two weeks of escalation that had driven Brent above $100. WTI crude was trading at $84.47, down 5.39%, while Brent crude had fallen to $91.80, a decline of 5.15%. The retreat came after Washington signaled on Friday that it would temporarily halt its bombing campaign against Iran. U.S. Ambassador to the United Nations Mike Waltz stated that the pause was "giving diplomacy some space" but added that additional military assets were moving into the region should diplomacy fail. Iran has indicated that it will also suspend attacks, with foreign ministry spokesperson Esmaeil Baghaei saying talks with the Omani delegation on Friday and Saturday were “constructive” and that some progress had been made. An Iranian official described Iran’s position as “attack for attack,” suggesting that it will halt operations for as long as the U.S. does. For oil markets, the pause was enough to trigger an aggressive round of profit-taking after weeks of relentless buying, but any sustained downward pressure will require a significant ramp-up in tanker traffic. Tankers will still face operational risks until a long-term agreement is reached. External factors that helped bring the latest round of attacks to an end include the U.S. bombing campaign largely exhausting its initial target list while consuming significant munitions. Domestic political concerns for President Trump, with the midterm elections now just 100 days away and the national average price of gasoline above $4 per gallon, will also have driven the pause. For traders, the coming days in oil markets will likely be defined by volatility driven by headlines from Washington and Tehran. While some of the immediate risk premium has been removed, shipping in both the Strait of Hormuz and the Red Sea will take time and confidence to recover.