Oil prices fell sharply on Monday after signs of de-escalation between the United States and Iran raised hopes of renewed ceasefire talks and reduced the immediate threat to global energy supplies.
Brent crude dropped 5.2 percent to around $92 a barrel, while US West Texas Intermediate (WTI) fell 5.4 percent to about $84.45.
The decline followed reports that Washington had paused military strikes over the weekend after nearly two weeks of attacks on targets inside Iran. US President Donald Trump’s envoy to the United Nations said the administration was “giving talks some space,” signalling a renewed push for diplomacy.
Iran also indicated it would suspend retaliatory attacks on regional neighbours, offering temporary relief to Gulf shipping routes and the global oil market.
The latest pause comes after both countries resumed hostilities earlier this month, ending a fragile truce. The renewed conflict was triggered by Iranian attacks on vessels transiting the Strait of Hormuz, prompting a series of retaliatory actions that derailed diplomatic efforts between Washington and Tehran.
The conflict later expanded beyond the strategic waterway, with Iran-backed Houthi rebels in Yemen targeting Saudi-linked vessels in the Bab al-Mandeb Strait, another vital maritime gateway connecting the Red Sea to global trade routes.
Oil prices had surged during the escalation, with Brent climbing above $100 a barrel last week for the first time since May amid fears of supply disruptions. However, confirmation that commercial shipping continued through the Red Sea helped calm markets late last week.
Additional relief came after Iran said discussions with Oman had made progress on arrangements for managing navigation through the Strait of Hormuz.
According to Iranian Foreign Ministry spokesman Esmaeil Baqaei, the talks focused on “common principles and operational mechanisms” to ensure safe maritime passage while respecting the sovereignty of both countries.
Separately, reports suggested Pakistan was exploring the possibility of reviving US-Iran peace negotiations following diplomatic efforts backed by China.
Brent at one point plunged more than seven percent during Monday’s session, briefly slipping below $90 a barrel before recovering some losses.
“It looks as if developments in the Middle East have moved in a positive direction over the weekend, adding some credibility to the notion that oil above $100 a barrel seems to induce de-escalatory behaviour from both sides,” said Sally Auld of National Australia Bank.
The easing geopolitical tensions also reduced fears of another inflationary shock and the prospect of further interest rate increases, helping lift sentiment across most global equity markets.
However, investors remained cautious over the long-term sustainability of the artificial intelligence boom and the massive capital spending by major technology companies.
South Korea’s market underperformed, falling more than one percent as semiconductor giants SK hynix and Samsung extended recent losses. Taipei, Singapore and Jakarta also declined, with Indonesian markets pressured by the surprise resignation of central bank governor Perry Warjiyo for personal reasons.
Tokyo edged higher despite declines in technology stocks including Advantest, Kioxia and Tokyo Electron. Markets in Hong Kong, Sydney, Shanghai, Wellington and Manila also posted gains.
Investors are closely watching this week’s corporate earnings, with results expected from SK hynix, Samsung and Japan’s Kioxia, while US technology giants Microsoft, Meta, Apple and Amazon are also scheduled to report. Market attention will focus on their earnings outlooks and artificial intelligence investment plans.
“Traders remain somewhat nervy about the scale of the capex being committed, given lingering concerns over how long the return-on-investment phase may take to fully materialise,” said Tim Waterer of KCM Trade.
Markets are also awaiting the US Federal Reserve’s latest policy decision later this week. While expectations for another rate increase have risen amid recent geopolitical tensions, most analysts still expect policymakers to leave interest rates unchanged.
Jenny Zeng of Allianz Global Investors said the Federal Reserve was likely to remain on hold in July but added that her firm still expects a total of 50 basis points of tightening before the end of the year.
In corporate news, Chinese memory chip manufacturer CXMT soared 470 percent during its Shanghai stock market debut after raising $9.8 billion in what Bloomberg described as China’s largest-ever mainland technology initial public offering. The rally briefly made the Anhui-based company more valuable than banking giant ICBC.
Key market indicators (0230 GMT)
West Texas Intermediate (WTI): Down 4.3% at $85.45 per barrel
Brent crude: Down 3.9% at $92.97 per barrel
Tokyo (Nikkei 225): Up 0.2% at 64,764.01
Hong Kong (Hang Seng): Up 0.8% at 25,160.38
Shanghai Composite: Up 0.3% at 3,826.19
Euro/Dollar: $1.1408 (from $1.1373)
Pound/Dollar: $1.3357 (from $1.3323)
Euro/Pound: 85.41 pence (from 85.34 pence)
Dollar/Yen: 163.54 (from 163.84)
Dow Jones Industrial Average: Up 0.5% at 51,947.25 (Friday close)
FTSE 100: Up 0.9% at 10,736.23 (Friday close)
AFP
