Oil prices fell as the United States suspended its nearly two-week-long daily attacks on Iran, easing concerns about supply disruptions from the region.
Brent crude plunged as much as 7.4% in London, briefly dipping below $90 a barrel. West Texas Intermediate crude also fell to near $84 a barrel, and European natural gas prices declined.
After 13 consecutive days of attacks on Iran aimed at weakening Tehran's ability to target commercial vessels, the United States appears to have halted its strikes late Friday without explanation or official announcement. Iranian media and the government have not reported any new attacks during this period, according to Bloomberg. Iran has indicated it will refrain from retaliatory attacks and has held talks with Oman regarding the Strait of Hormuz.
US President Donald Trump said late Friday that the United States is fully prepared to launch large-scale strikes against Iran, expressing his growing frustration with Tehran's refusal to reopen the Strait of Hormuz. He added that he has not yet made a final decision on whether to proceed with such strikes, after telling Axios days earlier that he was considering a large-scale attack.
This comes at a time when the US ambassador to the United Nations, Mike Waltz, confirmed that the decision to postpone was due to Trump's desire to give the Iran talks a limited chance.
A senior Trump administration official was asked on Saturday about this calm and said that the president has always been clear in his preference for diplomacy, but he has made it clear to Iran what will happen if it does not come to the negotiating table in earnest, according to Reuters.
Iranian skepticism about Washington's intentions
A senior Iranian source told Reuters on Sunday that Tehran would halt its attacks if the United States continued to suspend its strikes, but it remained skeptical of Washington's intentions.
The source added, a day after Washington suspended its attacks: Iran's position remains one of reciprocity: if the attacks stop, Iran will also stop its operations... and we conveyed this message to the United States.
He added: There is more skepticism than optimism about a halt to the attacks. The prevailing view is that this cessation is tactical and not genuine, according to Reuters.
Oil futures prices remain about a quarter higher this month, as the conflict between the United States and Iran spills beyond the Strait of Hormuz into the Red Sea, a vital alternative route when the war disrupted flows through Hormuz. The conflict, now nearing the end of its fifth month, has raised concerns about a global inflationary shock, with inventories dwindling and product prices soaring.
Sol Kavonic, senior energy analyst at MST Marquee, told Bloomberg: “The cessation of strikes and reports of progress in talks have boosted expectations of a return to the de-escalation track, which could lead to a recovery in flows. But there is a significant risk that any ceasefire will only be a temporary lull.”
The Russian-Ukrainian war is putting pressure on supplies.
Disruptions to flows continued elsewhere. Russia's largest Black Sea oil port halted shipments for several days amid escalating Ukrainian drone attacks.
According to a report published by Bloomberg on July 25, the Shishkhares terminal in Novorossiysk has been out of service since July 21.
Energy gains and their impact on economic growth, consumer spending and inflation will be among the topics that central bank governors will discuss this week.
In the United States, Federal Reserve officials will meet on July 28 and 29 to assess monetary policy.
Latest price movements:
Brent crude futures for September settlement fell 6.3% to $90.66 a barrel by 8:53 a.m. in London.
West Texas Intermediate crude futures for September delivery also fell 5.7% to $84.19 a barrel.
