"This pause is a clear sign both sides want to see if diplomacy can take hold," said Sally Auld from National Australia Bank, reflecting the market's sudden shift Monday. Oil prices plunged across the board after the US stopped its string of nightly airstrikes against Iranian targets, ending a 13-day campaign. Brent crude tumbled over 6% to $90.93 per barrel, retreating sharply after briefly breaking the $100 mark last week amid heightened tensions in the Red Sea.
The US administration, according to its UN envoy, deliberately stepped back to allow diplomatic channels space to operate. Iran responded by agreeing to suspend its retaliatory attacks on neighboring countries for the duration of the pause. Both nations emphasized their readiness to resume hostilities if talks falter, keeping the situation fragile. Iran also reported progress with Oman on securing safe passage through the critical Strait of Hormuz, a key shipping chokepoint.
Shipping disruptions remain a serious concern despite the lull in military actions. Vessel traffic through the Strait of Hormuz has slowed, while the Bab el-Mandeb Strait continues to face obstacles following recent strikes by Houthi forces on Saudi installations. According to ANZ, strategies like reduced Chinese crude imports, emergency stockpile releases, and alternative export routes from Saudi Arabia have been absorbing shocks but are stretching thin. These factors suggest that any renewed conflict could quickly push oil prices back up due to tightening supply buffers.
Market analysts from ING highlighted how quickly the war premium had been integrated into prices and how swiftly it unraveled with the announcement of a pause. The recent volatility shows that the conflict’s outcome remains uncertain, with Washington yet to confirm a full de-escalation. Observers will be watching developments closely as new talks reportedly gain traction, including Pakistan’s potential mediation efforts following a push from China.
