Oil prices fell by more than 5 percent on Monday, July 27, after the United States and Iran paused military strikes over the weekend, raising hopes that diplomatic efforts could ease tensions and eventually restore normal shipping through the Strait of Hormuz.
Brent crude futures fell $5.70, or about 5.9 percent, to $91.08 a barrel by 0804 GMT, after briefly slipping below the $90 mark earlier in the trading session. U.S. West Texas Intermediate (WTI) crude dropped $4.80, or about 5.4 percent, to $84.51 a barrel. Both benchmarks were trading at their lowest levels in nearly a week after posting gains over the previous three weeks.
Brent crude had previously climbed to $100 per barrel as the conflict disrupted oil shipments through the Strait of Hormuz and spilled into the Red Sea, affecting exports from Saudi Arabia through the Bab el Mandeb Strait, a key route for oil shipments to Asia.
U.S. Ambassador to the United Nations Mike Waltz said on Sunday that President Donald Trump had decided to pause U.S. attacks to allow more time for diplomacy.
“The market seems to be forever seeking good news from an arena that really is not providing any,” said John Evans, an analyst at PVM. He cautioned that while the temporary pause in military operations was a positive development, there were no guarantees that normal oil flows would resume quickly.
Shipping data from Kpler showed that fewer than 10 commodity vessels passed through the Strait of Hormuz each day over the weekend, highlighting continued caution among shipping companies despite the lull in fighting.
Saul Kavonic, an analyst at MST Marquee, said any recovery in shipping traffic through the Strait of Hormuz would likely be gradual because many operators remain concerned about vessel safety.
Meanwhile, traffic through the Bab el Mandeb Strait also declined after Yemen’s Houthi movement attacked Saudi oil facilities along the Red Sea coast. However, shipping data showed that a third Chinese supertanker successfully transited the waterway during the weekend. Analysts at Societe Generale estimate that every month without a resolution to the Red Sea crisis could add at least $10 per barrel to global oil prices.
Analysts also warned that crude markets remain vulnerable to further disruptions caused by instability in the Middle East and Russia’s war in Ukraine. Analysts at UOB said sustained supply disruptions could keep oil prices elevated and increase inflationary pressures worldwide.
Ukraine said it carried out drone strikes on several Russian oil facilities over the weekend, adding another layer of uncertainty to global energy markets.
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