Oil prices fell after Israel and Iran agreed to halt mutual attacks following an escalation of violence that threatened to undermine efforts to end the war in the Middle East.
Brent crude fell to near $93 a barrel after closing slightly higher on Monday, while West Texas Intermediate crude traded below $91 a barrel.
Israeli Prime Minister Benjamin Netanyahu stated that his country has halted its attacks on Iran for the time being, but will retaliate if Tehran launches another attack. Iranian media outlets reported similar statements.
The escalation of hostilities has jeopardized broader negotiations to end the war in the Middle East, prompting US President Donald Trump to call for de-escalation. A fragile ceasefire remains in place, but the Strait of Hormuz remains closed due to the dual blockade imposed by Tehran and Washington, disrupting global supplies of crude oil, fuel, and natural gas.
In a sign of the continued risks in the region, US forces disabled an empty oil tanker in the Gulf of Oman on Monday after it breached the blockade by attempting to sail to an Iranian port, according to a statement from US Central Command on its X platform. The Israeli military also intercepted a suspicious aerial target approaching from Yemen.
Complete victory within two weeks
Late Monday evening, Trump declared that the United States would achieve total victory in its conflict with Iran within the next two weeks, during remarks at a virtual Republican campaign rally in South Carolina. He added that negotiations were underway with Tehran and reiterated that oil prices would fall once the conflict was over.
Even if a peace agreement is reached between the United States and Iran, the US will face numerous obstacles to resuming normal oil flows. These include the need to clear mines in the Strait of Hormuz, the potential for restarting shut-down oil fields to take months, and the need to repair the damage inflicted on energy infrastructure by drone and missile strikes.
Al Salazar, head of oil and gas research at consultancy Inferus, said that oil prices are still being influenced by news reports, adding: “We believe that prices still need to be steady at three digits to fully explain the decline in inventory levels.”
In the latest trading, Brent crude futures for August settlement fell 0.7% to $93.57 a barrel by 11:00 AM Singapore time. West Texas Intermediate crude futures for July delivery also declined, dropping 0.8% to $90.61 a barrel.
