Oil markets breathed their first real sigh of relief in weeks on Monday, as crude prices tumbled more than 5% after Washington and Tehran stepped back from the brink following a tense fortnight of tit-for-tat military strikes.
The sell-off was swift and sharp. Brent crude futures shed $5.70, roughly 5.9%, to trade at $91.08 a barrel by 08:04 GMT, briefly punching through the psychologically important $90 floor before steadying. U.S. West Texas Intermediate fell in tandem, down $4.80, or about 5.4%, to $84.51.
Both benchmarks are now at their weakest levels in nearly a week, snapping a three-week run of gains that had, at its peak, pushed Brent to the symbolic $100-a-barrel mark.
The catalyst was a weekend pause in hostilities. Mike Waltz, the U.S. ambassador to the United Nations, told Fox News Sunday and other outlets that President Trump had opted to halt American strikes to give diplomacy room to work, a signal traders read as the first tangible off-ramp from a conflict that had rattled energy markets since it flared over the Strait of Hormuz and later bled into the Red Sea, choking off exports from Saudi Arabia, the world’s largest oil exporter, through the Bab el-Mandeb Strait.
But the rally in confidence is running well ahead of the rally in actual tanker traffic. Shipping data from Kpler showed fewer than 10 commodity vessels transiting the Strait of Hormuz per day over the weekend, a trickle compared to normal flows through one of the world’s most critical chokepoints, handling roughly a fifth of global oil consumption.
Analysts were quick to temper the market’s enthusiasm. “The market seems to be forever seeking good news from an arena that really is not providing any,” said John Evans of PVM, warning that a pause in strikes “does not come with any guarantees that oil will soon flow from the area.”
Prices, he argued, will only keep falling if elevated costs finally crimp demand, “not questionable mini-ceasefires.”
That skepticism was echoed by Saul Kavonic of MST Marquee, who cautioned that shippers are unlikely to rush back into the strait. “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,” he said.
Compounding the caution, traffic through the Bab el-Mandeb strait, the other critical artery for Gulf exports, actually declined on Sunday after Yemen’s Houthi forces struck Saudi oil installations along the Red Sea coast.
Not everything ground to a halt, however: a third Chinese supertanker managed to exit via Bab el-Mandeb over the weekend, a small sign that some operators are testing the waters, literally and figuratively.
Societe Generale estimates the stakes clearly: every additional month without a Red Sea resolution could tack on at least $10 a barrel to crude prices.
The broader risk picture remains far from settled. Analysts at UOB pointed to a second front of disruption: Ukrainian drone strikes hitting Russian tankers and refineries as another factor that could keep a floor under prices and add to global inflation pressures if supply constraints persist.
Ukraine confirmed it struck several Russian oil facilities over the weekend, underscoring that the Middle East is not the only theater keeping energy traders on edge.
For now, Monday’s route reflects hope more than certainty, as the market is pricing in the possibility of peace while the actual mechanics of shipping, insurance, and security in two of the world’s most vital maritime corridors remain very much unresolved.
WHAT YOU SHOULD KNOW
Oil prices dropped over 5% Monday purely on hope of a U.S.-Iran pause in strikes, not on any actual improvement in shipping conditions. Tanker traffic through the Strait of Hormuz remains near a standstill, and Red Sea routes are still under threat from Houthi attacks.
Analysts agree: until ships genuinely resume safe passage through these chokepoints, this price drop reflects optimism, not resolution, and prices remain vulnerable to reversing if the ceasefire falters or attacks resume.
