- Oil prices fell sharply after a pause in fighting between the US and Iran, the biggest decline since early April.
- Brent futures closed at $85.87 per barrel, down 11.3%. US crude dropped about 7% to $82.61 a barrel.
- Oil prices continued to trend lower in early Asian trade on Tuesday as a fourth night passed without any attacks from either Iran or the United States.
- President Donald Trump said the US halted strikes on Iran at the request of the Iranian regime and warned the US would resume attacks if a new ceasefire deal weren’t reached.
- Ship traffic through the Strait of Hormuz also remains well below prewar levels.
- Fewer than 10 commodity ships passed through the waterway as of Monday morning, according to shipping data tracked by CNN.
- Despite the pullback, oil prices remain elevated as shipping disruptions continue to weigh on Middle East energy flows, with particular concerns over Red Sea traffic as the Houthis attempt to Iran's control over the Strait of Hormuz.
- Traffic through the Bab el-Mandeb Strait did drop on Sunday following a Houthi attack on Saudi oil installations along the Red Sea coast, but the Yemeni group does not pose quite as large a threat as Iran does over Hormuz.
- Alongside a falling geopolitical risk premium, demand destruction is helping to drag prices lower, with $100 oil already hurting consumption.
- Last week, the EIA reported across the board, which was perhaps one of the first signs of demand destruction kicking in.
Oil prices in Iran have seen a significant decline following a pause in US military actions against the Iranian regime. Brent futures closed at $85.87 per barrel, marking an 11.3% drop, while US crude fell to $82.61, down 7%.2
President Donald Trump confirmed that the US halted strikes at Iran's request, emphasizing that military action could resume if a new ceasefire is not established. This decision has contributed to a notable decrease in oil prices, the largest since early April.4
Shipping traffic through the Strait of Hormuz remains significantly below prewar levels, with fewer than 10 commodity ships reported passing through as of Monday morning. Analysts from Deutsche Bank have raised concerns about potential disruptions to Gulf and Red Sea export routes due to Houthi attacks.5
Despite the recent pullback in prices, the overall market remains sensitive to geopolitical tensions, particularly regarding the ongoing situation in the Middle East. Demand destruction is also influencing prices, as high oil costs have begun to impact consumption, with the EIA reporting signs of this trend last week.
As the situation evolves, the market will be closely monitoring both diplomatic efforts and military developments in the region.
“Despite the recent decline, oil prices remain elevated due to ongoing shipping disruptions in the Middle East, particularly concerning Red Sea traffic. Deutsche Bank analysts noted that Houthi attacks could disrupt both Gulf and Red Sea export routes, raising concerns about future supply stability.”
Crude Oil Prices Today | OilPrice.com
