Oil prices fell on Monday as the United States and Iran suspended their escalating strikes to make “room” for diplomacy.
Both sides stopped their shooting over the weekend, after 13 straight nights of attacks that shattered their agreement to end the war and threatened further suffering for the global economy.
Brent crude oil, the international benchmark, fell below $90 a barrel on Monday morning. while U.S. crude fell to around $83 a barrel, both down around 7%. Global markets were also higher, with U.S. stock futures surging sharply.
The renewed optimism follows growing fears of a return to all-out war in the Middle East, as the battle for control of the crucial region Strait of Hormuz expanded to the Red Seaanother key waterway for global trade.
President Donald Trump said Thursday it was considering a “massive attack” to try to break Iran’s grip on the strait, but since then the United States and Iran have refrained from any attacks for three days.
Jordan, a key U.S. ally, said it shot down two drones early Monday, although it was unclear who launched them.
U.S. Ambassador to the United Nations Mike Waltz told NBC News’ “Meet the Press” on Sunday that the decision to stop the strikes was a response to ongoing talks between the two sides.
“What the president is doing now, as we’ve seen from the beginning, is giving some space to some talks,” he said, adding that talks were “ongoing” but there was “infighting” on the Iranian side.
Walz fired reporting that US weapons stockpiles are depleted.
Yet Tehran offered limited hope for an acceleration of peace efforts.
“Mediators can convey messages to us from the American side regarding regional developments, but at present we do not have any negotiations with the American side,” Foreign Ministry spokesperson Esmaeil Baghaei told a news conference on Monday.
He said Tehran “would never allow America to determine the moment of war and peace” and that it would “continue to defend itself as long as our interests and considerations demand.” However, he added that “whenever we feel that we can use diplomacy as a tool to safeguard our national interests, we will certainly use it as an instrument.”
Baghaei claimed that the Strait of Hormuz was “closed.”
Oil prices climbed above $100 a barrel last week for the first time in two months as the conflict escalated, with the blockade of Hormuz and further disruption from attacks by Iran-backed Houthi rebels in the Red Sea.
Maritime traffic through Hormuz and the Bab el-Mandeb bottleneck was extremely limited over the weekend.
Traffic through Bab el-Mandeb appeared to decrease on Sunday after the Houthis attacked Saudi oil installations along the Red Sea coast, according to Kpler maritime data shared with the Reuters news agency. Only 11 cargo ships passed through the strait that day, the lowest level in months.
Meanwhile, transit through the Strait of Hormuz also remained low over the weekend, according to Kpler, with fewer than 10 cargo ships passing through the waterway over the weekend.
Before the war, around 20% of the world’s oil passed through this key trade route, with its repeated closures leading to soaring energy prices and falling global markets throughout the conflict.
“The market still seems to be looking for good news in an area that is providing none,” said John Evans, an analyst at PVM.
“A suspension of military strikes may seem like an improvement, but it does not guarantee that oil will flow from the region soon…Prices will continue to fall only if high prices dampen demand again, not questionable mini-ceasefires.”
On Monday, Iran’s semi-official Tasnim news agency reported that six ships attempted to pass through Hormuz “by turning off their navigation and positioning systems.” One of them “suffered an incident”, while the others were returned to the Persian Gulf “under the decisive leadership of Iran”.
Beyond the Middle East, attacks between Russia and Ukraine have also increasingly focused on shipping, further complicating markets.
Iran’s Foreign Ministry accused Ukraine over the weekend of attacking an Iranian commercial ship in the Caspian Sea, saying one sailor was killed and another injured. The ministry summoned the Ukrainian charge d’affaires in Tehran in protest.
Ukrainian President Volodymyr Zelensky said kyiv had “noticed that Russia was transmitting its satellite observations in the Middle East to Iran to allow Tehran to direct strikes in the region.”