Global oil prices dropped sharply on Monday as growing optimism over a possible peace deal between the United States and Iran eased concerns about disruptions in energy supplies.
Brent crude futures fell by $5.85, or 5.7 per cent, to $97.69 per barrel, while U.S. West Texas Intermediate crude dropped $5.75, or six per cent, to $90.85 per barrel. Both benchmarks hit their lowest levels since May 7.
The decline followed comments by U.S. President Donald Trump, who said Washington and Tehran had “largely negotiated” an understanding that could lead to the reopening of the Strait of Hormuz — a vital shipping route responsible for about one-fifth of global oil and liquefied natural gas supplies before the conflict.
Analysts said the development brought some relief to the global energy market, although uncertainty remains over whether both sides can reach a final agreement.
MST Marquee analyst Saul Kavonic said there was now “some light at the end of the tunnel” despite lingering risks surrounding the peace negotiations and the future of the Strait of Hormuz.
However, ING’s head of commodities strategy, Warren Patterson, cautioned that markets remained careful about reacting too strongly, noting that similar negotiations had collapsed in the past.
Experts also warned that even if a deal is reached, restoring normal oil flows through the strait could take several months as damaged oil and gas infrastructure would still need repairs.
Meanwhile, U.S. energy companies increased the number of active oil and gas rigs for the fifth consecutive week, responding to recent gains in domestic energy prices.
