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Oil Slumps Over 5% as Hopes Rise for Fresh US-Iran Deal
Staff Correspondent
Global oil prices tumbled by more than five percent at the opening of Asian trading on Monday as easing tensions between the United States and Iran fuelled hopes that the two countries could revive diplomatic negotiations, reducing fears of a prolonged disruption to energy supplies from the Middle East.
Investors reacted positively after two consecutive nights passed without reported US airstrikes on Iran, a notable departure from the intense exchange of attacks that had rattled global energy markets in recent weeks. The relative calm raised expectations that both sides may be preparing to return to the negotiating table, easing concerns over the security of oil shipments through the Strait of Hormuz.
International benchmark Brent crude fell by 5.58 percent to US$91.38 a barrel in early Asian trading, while West Texas Intermediate (WTI), the US benchmark, dropped 5.46 percent to US$84.43 a barrel.
The sharp decline came after crude prices had surged in recent weeks as the conflict between Washington and Tehran escalated, triggering fears of supply disruptions in one of the world’s most strategically important oil-producing regions.
Market sentiment improved following comments from US President Donald Trump indicating that Washington remains open to negotiations with Tehran. Speaking on Friday, Trump said Iranian officials were “talking to us right now” and expressed willingness to pursue a deal if conditions allowed.
Iran also confirmed that indirect contacts between the two countries were continuing through mediators, although officials in Tehran cautioned that significant differences remained and no breakthrough had yet been achieved.
The renewed diplomatic signals have eased immediate concerns over the Strait of Hormuz, through which roughly one-fifth of global oil supplies pass each day. Any disruption to traffic through the narrow waterway has the potential to send energy prices soaring and trigger wider economic repercussions worldwide.
Analysts said traders were unwinding some of the geopolitical risk premium that had been built into oil prices during the recent escalation. However, they warned that the market remains highly sensitive to developments in the Gulf, where any renewed military action or threat to shipping could quickly reverse the downward trend.
Despite Monday’s sharp decline, oil prices remain elevated compared with levels seen before the latest outbreak of hostilities.
Investors are expected to closely monitor diplomatic efforts, military developments and shipping conditions in both the Strait of Hormuz and the Red Sea, as well as any signals from major oil-producing nations regarding potential adjustments to supply.
Financial markets are likely to remain volatile in the coming days, with energy traders balancing hopes for a diplomatic breakthrough against the persistent risk of renewed conflict in the Middle East.
Economists note that sustained lower oil prices would help ease inflationary pressures, reduce transport and manufacturing costs, and provide relief to oil-importing countries, including Bangladesh. However, any collapse of the ongoing diplomatic efforts could once again push crude prices sharply higher.