Global oil prices fell sharply on Monday as growing optimism over a possible diplomatic breakthrough between the United States and Iran eased fears of prolonged supply disruptions in the Middle East.
Brent crude, the international oil benchmark, dropped by nearly six per cent to trade below $100 per barrel, while U.S. West Texas Intermediate (WTI) crude also recorded significant losses amid reports that negotiations between Washington and Tehran were progressing.
As of the time of filing this report on Monday, Brent Crude was $96.14 per barrel from $105 over the weekend while the WTI was $90 per barrel.
The decline follows indications that both countries are moving closer to a framework agreement that could lead to the reopening of the Strait of Hormuz, a key global oil shipping route through which nearly a fifth of the world’s crude supply passes.
Investors reacted positively to reports suggesting that the two sides may sign a memorandum of understanding that would temporarily ease tensions and allow discussions to continue over the next 60 days. Analysts say the possibility of reduced geopolitical risks has weakened the “war premium” that had pushed oil prices sharply higher in recent months.
The oil market has remained highly volatile since the escalation of tensions involving Iran earlier this year, which disrupted shipping activities around the Strait of Hormuz and triggered fears of tighter global supply. Prices had surged above $110 per barrel at the peak of the crisis before retreating on renewed diplomatic efforts.
US President Donald Trump had said Sunday in a post on his social media platform Truth Social that negotiations with Iran are “orderly and constructive,” while stressing that the naval blockade would remain in place until a final agreement is reached.
Trump also said US-Iran relations are becoming “much more professional and productive,” while warning that Tehran must not develop or acquire a nuclear weapon.
US Secretary of State Marco Rubio said Monday that there might be news “maybe today” regarding the talks.
“Work still in progress. We thought we might have some news last night, maybe today…,” Rubio told reporters in India’s capital, New Delhi, as he traveled to the city of Agra to visit the Taj Mahal.
Market analysts, however, warned that the latest price drop may be premature, noting that no final agreement has yet been signed and that significant obstacles remain in the negotiations.
“There is optimism in the market, but traders remain cautious because previous talks have collapsed before reaching implementation stage,” analysts at Sparta Commodities said in a market note as quoted by Reuters.
Experts also noted that even if a deal is eventually reached, restoring normal oil flows and repairing damaged infrastructure across the region could take several months.
The sharp fall in crude prices boosted global equity markets, especially airline and manufacturing stocks, as investors anticipated lower energy costs and easing inflationary pressures. Asian and European markets closed higher on Monday following the oil price decline.
Despite the optimism, energy traders are expected to closely monitor further developments in the negotiations, with oil prices likely to remain sensitive to geopolitical headlines in the coming weeks.
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