Global oil prices dropped sharply on Monday and touched their lowest level in two weeks after signs emerged that the United States and Iran were moving closer to a possible peace agreement. The development raised hopes that the vital Strait of Hormuz could reopen fully and ease pressure on global energy supplies.
United States President Donald Trump said over the weekend that Washington and Tehran had “largely negotiated” a memorandum of understanding aimed at reducing tensions in the Gulf region and restoring oil shipments through the Strait of Hormuz.
Brent and WTI Crude Prices Fall Sharply
Brent crude futures fell by $4.71, or 4.55%, to settle at $98.83 per barrel by 2234 GMT. Meanwhile, US West Texas Intermediate (WTI) crude declined by $4.57, or 4.73%, to $92.03 per barrel.
Both major oil benchmarks earlier touched their lowest levels since May 7 as traders reacted to expectations that tensions in the Gulf could eventually ease.
The market decline came despite continued uncertainty surrounding the conflict and disruptions in the Strait of Hormuz, a key shipping route that previously handled nearly one-fifth of global oil and liquefied natural gas exports.
Strait of Hormuz Remains Critical
Strait of Hormuz remains one of the world’s most strategically important energy corridors. The ongoing blockades and military tensions in the region have severely disrupted oil supplies from the Middle East in recent weeks.
Although optimism around diplomacy pushed prices lower, analysts warned that the situation remains fragile. Several oil and gas facilities in the region have suffered damage during the conflict, while shipping routes continue to face restrictions.
US Secretary of State Marco Rubio said the Gulf conflict was expected to last “weeks not months” and stressed that Washington would not require ground troops in the region.
Trump Signals Progress but Warns Against Rushing
Speaking on Saturday, Trump said the US and Iran had made significant progress toward a peace arrangement. However, he later cautioned that negotiations should not be rushed.
On Sunday, Trump stated that he had instructed American representatives to take their time before finalising any agreement with Iran, indicating that several major issues still remain unresolved.
Diplomatic sources say disagreements continue over security guarantees, sanctions relief, and the future management of shipping activity in the Gulf.
Analysts See Temporary Relief for Oil Markets
Energy analysts believe the possibility of a peace deal has reduced immediate fears of a prolonged supply crisis. However, they also warned that normal oil flows may not resume quickly.
MST Marquee analyst Saul Kavonic said there was now “some light at the end of the tunnel” despite ongoing risks surrounding the negotiations and the Strait of Hormuz situation.
According to analysts, it could take several months for damaged infrastructure to be repaired and for oil exports through the Strait to fully recover. Insurance costs for tankers operating in the region also remain elevated, adding further uncertainty to energy markets.
Global Markets Closely Watching Gulf Developments
The Gulf conflict has remained one of the biggest drivers of global oil prices this year. Countries heavily dependent on Middle Eastern oil supplies continue to monitor the situation closely as higher fuel prices have already increased inflationary pressure worldwide.
Any successful agreement between the US and Iran could stabilise energy markets and reduce fears of further supply disruptions. However, traders remain cautious due to the complex political and military challenges still facing the negotiations