US-Iran Tensions Ease as Oil Prices Fall Sharply

Oil prices dropped sharply on Monday as signs of de-escalation emerged between the US and Iran

Global oil prices fell sharply on Monday after signs of de-escalation appeared between the US and Iran. As a result, a significant portion of the "war premium" accumulated over the past week disappeared, which had temporarily driven Brent prices to $100 per barrel.

During the trading session, Brent futures declined by 9.1% and reached $97.95, while West Texas Intermediate (WTI) oil prices fell by 7.4% to $82.67.

Last week, Brent prices exceeded $100 as there were concerns that the Iran conflict would expand from the Strait of Hormuz to the Red Sea, which would further disrupt oil exports from the Middle East.

However, prices fell after Washington temporarily halted a 13-day air campaign. According to The New York Times, the White House was concerned that continuing operations would deplete the US's strategic military resources. Later, US Ambassador to the UN Mike Waltz stated that President Donald Trump wants to give negotiations "space."

Meanwhile, according to Reuters, an Iranian representative stated that Tehran would halt retaliatory military actions if the US maintains the pause. Nevertheless, both sides claim they are ready to resume military operations if negotiations break down.

According to ING analysts, Monday's sharp decline reflects how quickly the market reacts to any sign of conflict de-escalation.

In their view, despite the halt in military operations being the first real signal of reduced tension, it is premature to say that the conflict has entered a phase of long-term de-escalation, as Washington has not fully explained the reasons for the pause.