Global oil prices fell sharply on Monday after signs of easing tensions between the United States and Iran improved hopes for renewed diplomacy. Investors also welcomed indications that discussions on the Strait of Hormuz could resume, reducing fears of further supply disruptions.
The decline followed a weekend without fresh US strikes on Iran. At the same time, both sides signalled a willingness to reduce military escalation, providing relief to global energy markets.
US and Iran Pause Military Escalation
After 13 days of attacks on sites inside Iran, the United States refrained from carrying out additional strikes over the weekend.
Meanwhile, US President Donald Trump’s UN envoy said the president was “giving talks some space”.
Iran also announced that it would halt retaliatory attacks against regional neighbours. Consequently, the development offered temporary relief to Gulf shipping and the oil industry.
Strait of Hormuz Back in Focus
The latest pause has renewed hopes for negotiations on reopening and managing the Strait of Hormuz, one of the world’s most important energy corridors.
Earlier this month, hostilities resumed after Iran attacked ships passing through Omani waters in the Strait of Hormuz. As a result, a fragile ceasefire between Washington and Tehran collapsed.
The conflict later expanded beyond the strategic waterway. Iran-backed Houthi rebels in Yemen also targeted Saudi vessels in the Bab al-Mandeb Strait, another critical shipping route leading into the Red Sea.
These developments raised serious concerns over global energy supplies and pushed crude oil prices sharply higher.
Fresh Diplomatic Efforts Lift Market Sentiment
Investor confidence improved after the United States paused further military action.
At the same time, Iran said on Sunday that progress had been made during talks with Oman regarding the management of the Strait of Hormuz.
According to Iranian Foreign Ministry spokesperson Esmaeil Baqaei, the discussions focused on “common principles and operational mechanisms” for ensuring the safe passage of shipping through the strait while respecting the sovereign rights of the two states.
Meanwhile, a report stated that Pakistan is considering efforts to help resume US-Iran peace talks following an initiative led by China.
Brent and WTI Record Sharp Losses
The easing geopolitical tensions immediately affected global oil markets.
Both major crude benchmarks declined sharply on Monday. Brent crude dropped more than seven percent at one stage before briefly falling below $90 per barrel.
Later in the session, Brent North Sea Crude traded at $92.97 per barrel, down 3.9 percent.
Meanwhile, West Texas Intermediate (WTI) fell 4.3 percent to $85.45 per barrel.
Commenting on the market reaction, National Australia Bank’s Sally Auld said, “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.”
Lower Oil Prices Support Global Markets
The decline in crude prices also eased concerns about inflation and possible interest rate increases.
Consequently, several global equity markets moved higher during Monday’s trading session.
Tokyo’s Nikkei index gained 0.2 percent, while Hong Kong’s Hang Seng Index rose 0.8 percent. Similarly, Shanghai’s Composite Index advanced 0.3 percent.
Sydney, Wellington and Manila also posted gains during the session.
However, Seoul remained under pressure as technology stocks continued to face selling. Shares of SK hynix and Samsung declined again amid ongoing concerns over artificial intelligence investment spending.
Taipei and Singapore also traded lower. Meanwhile, Jakarta weakened after the unexpected resignation of Indonesian central bank governor Perry Warjiyo.
Investors Await Major Earnings and Fed Decision
Market attention has now shifted to several major corporate earnings reports due this week.
Investors are closely watching results from SK hynix, Samsung and Japan’s Kioxia. In addition, US technology giants Microsoft, Meta, Apple and Amazon are also scheduled to release earnings.
Analysts expect investors to focus on future spending plans and returns from heavy investment in artificial intelligence.
Tim Waterer of KCM Trade said, “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.”
Meanwhile, markets are also awaiting the US Federal Reserve’s latest monetary policy decision.
Although expectations for another interest rate increase have strengthened recently, analysts broadly expect the central bank to leave rates unchanged this week.
However, Allianz Global Investors’ Jenny Zeng warned, “While the (policy board) is likely to remain on hold in July, we continue to expect 50 basis points of tightening by year-end.”
Chinese Chipmaker Makes Strong Market Debut
In corporate news, Chinese memory chipmaker CXMT surged 470 percent during its market debut in Shanghai.
The rally briefly made the company more valuable than the Industrial and Commercial Bank of China (ICBC).
According to reports, the Anhui-based company raised $9.8 billion through its initial public offering, making it China’s largest mainland technology share sale to date.
Despite continued uncertainty surrounding artificial intelligence investments, easing tensions in the Middle East remained the main driver behind Monday’s sharp decline in global oil prices. Investors will now closely watch diplomatic developments and central bank decisions for further market direction.
