Global oil prices tumbled on Monday, falling to their lowest levels in two weeks as markets reacted to growing optimism that the United States and Iran may be edging closer to a deal that could ease disruptions in the critical Strait of Hormuz.
Brent crude dropped 5.7% to 97.69 dollars a barrel, while US West Texas Intermediate fell 6% to 90.85 dollars. Both benchmarks touched their lowest levels since early May, reflecting a sharp shift in sentiment after weeks of heightened geopolitical risk premiums.
The decline follows remarks by President Donald Trump, who said over the weekend that Washington and Tehran had “largely negotiated” an understanding that could pave the way for reopening the Strait of Hormuz. The narrow waterway, which previously handled roughly a fifth of global oil and liquefied natural gas shipments, has been at the centre of supply concerns since the conflict escalated.
For traders, even tentative progress has been enough to trigger a sell off. The possibility of restored flows through the strait suggests a loosening of supply constraints that had driven prices above 100 dollars a barrel in recent weeks.
Analysts, however, are urging caution. While the rhetoric points to progress, key sticking points remain unresolved, including security arrangements and restrictions linked to maritime access. Trump himself signalled a measured approach, indicating that negotiators had been instructed not to rush into an agreement.
Market participants are wary of false starts. Previous rounds of negotiations between the two sides have collapsed at similar stages, and there is little certainty that current talks will deliver a durable outcome. As a result, while prices have reacted quickly to headlines, conviction behind the move remains limited.
Even if a deal is reached, a full return to normal supply conditions is unlikely to be immediate. Damage to infrastructure and the complexity of restoring shipping routes mean that oil and gas flows could take months to recover fully. This lag could keep markets sensitive to any renewed disruptions or political setbacks.
The broader geopolitical backdrop continues to cast a long shadow. Questions remain about whether all parties involved are aligned on a swift resolution, particularly given the strategic importance of the region to global energy markets.
In the United States, higher domestic energy prices in recent weeks have already prompted a response from producers. Data from Baker Hughes showed that firms added oil and gas rigs for a fifth consecutive week, pushing the total count to 558, the highest level since June last year. The increase signals expectations of stronger future output, although the total remains slightly below levels seen a year ago.
For now, markets appear to be searching for direction. Prices have retreated sharply on hopes of de escalation, but uncertainty over the outcome of negotiations continues to limit confidence. The coming days will be crucial in determining whether the current optimism translates into a sustained easing of tensions or proves to be another temporary reprieve in a volatile market.
