July 27, Colombo (LNW): Global oil prices fell sharply on Monday (27) after the United States and Iran suspended military strikes over the weekend, easing immediate fears of a wider regional conflict and raising expectations that renewed diplomatic efforts could help restore stability to vital international shipping routes.
Brent crude dropped by $4.89, or 5.05 per cent, to $91.89 a barrel by 0009 GMT, having briefly fallen below the significant $90 mark earlier in the trading session. Meanwhile, US West Texas Intermediate (WTI) crude declined by $4.67, or 5.23 per cent, to $84.64 per barrel.
The sharp decline left both benchmark contracts trading at their lowest levels in almost a week, reversing part of the gains recorded during the previous three weeks amid escalating tensions in the Middle East.
Earlier, Brent crude had surged to around $100 per barrel as hostilities disrupted oil shipments through the Strait of Hormuz and spread towards the Red Sea. The instability also affected exports from Saudi Arabia, the world’s largest oil exporter, with shipments through the Bab el-Mandeb Strait to Asian markets facing significant disruption.
The shift in market sentiment followed comments by US Ambassador to the United Nations Mike Waltz, who told Fox News Sunday and other American media outlets that President Donald Trump had decided to halt further US military action for the time being in order to allow diplomatic negotiations additional time to progress.
Market analysts said investors responded positively to the prospect of renewed dialogue. IG Markets analyst Tony Sycamore noted that optimism was growing that a meaningful diplomatic solution could emerge, adding that a return to the previously discussed 14-point memorandum of understanding, together with greater clarity over navigation and security in the Strait of Hormuz, would provide a constructive basis for reducing tensions.
Despite the temporary pause in military operations, maritime traffic has yet to recover. Shipping data from Kpler showed that fewer than 10 commodity vessels transited the Strait of Hormuz each day over the weekend, highlighting the continued caution among shipping operators.
Meanwhile, activity through the Bab el-Mandeb Strait also slowed on Sunday after Yemen’s Houthi movement launched attacks on Saudi oil facilities along the Red Sea coast. Even so, a third Chinese supertanker successfully exited the area via the strategic waterway.
Analysts cautioned that a full recovery in shipping is unlikely to happen quickly. MST Marquee analyst Saul Kavonic said many shipping companies remain reluctant to increase vessel movements through the Strait of Hormuz until there is stronger confidence that the security situation has stabilised, suggesting that any improvement in oil flows is likely to be gradual rather than immediate.
