Oil prices fell sharply on Monday as hopes of renewed diplomacy between the United States and Iran eased concerns over global energy supplies. The decline came after both sides paused military action, raising expectations of a return to ceasefire talks and negotiations over shipping through the Strait of Hormuz.
After 13 days of strikes on targets in Iran, the United States carried out no new attacks over the weekend. US President Donald Trump’s envoy to the United Nations said the President was “giving talks a chance.”
Meanwhile, Tehran announced it would halt retaliatory attacks against neighbouring countries, offering temporary relief to Gulf shipping routes and the global oil market.
Tensions had driven prices above $100
Hostilities resumed earlier this month after Iranian attacks on vessels transiting the Strait of Hormuz triggered a fresh escalation in regional tensions.
The conflict also spread beyond the strategic waterway, with Iran-backed Houthi rebels in Yemen targeting Saudi vessels in the Bab el-Mandeb Strait, another vital maritime corridor linking the Red Sea.
The renewed instability pushed oil prices sharply higher, with Brent crude climbing above $100 per barrel last week for the first time since May. However, reports that shipping through the Red Sea remained uninterrupted, combined with signs of diplomatic progress, helped reverse market sentiment.
Strait of Hormuz talks calm investors
The market received further support after Iran said progress had been made during discussions with Oman on managing navigation through the Strait of Hormuz.
Iranian Foreign Ministry spokesperson Esmail Baghaei said the talks focused on establishing common principles and operational mechanisms to ensure the safe passage of vessels while respecting the sovereign rights of both countries.
Separate reports also suggested Pakistan is considering facilitating renewed peace talks between Washington and Tehran following an initiative by China.
Brent and WTI post sharp losses
Both major oil benchmarks recorded significant declines on Monday.
Brent crude was down 3.9% at $92.97 per barrel after falling by more than 7% earlier in the session and briefly dropping below $90.
US West Texas Intermediate (WTI) crude fell 4.3% to $85.45 per barrel.
The drop in oil prices also eased concerns over renewed inflationary pressures and the possibility of further interest rate hikes, providing support to several global equity markets.
Mixed performance across stock markets
Despite improving sentiment driven by lower oil prices, investors remained cautious about the sustainability of heavy investment in artificial intelligence, weighing on technology stocks.
Seoul led losses, with shares of SK Hynix and Samsung under pressure. Markets in Taipei, Singapore and Jakarta also declined after the unexpected resignation of Indonesia’s central bank governor, Perry Warjiyo.
In contrast, stock markets in Tokyo, Hong Kong, Sydney, Shanghai, Wellington and Manila ended higher.
Investors are now focused on earnings reports due this week from major technology companies including Microsoft, Meta, Apple and Amazon, as well as the upcoming US Federal Reserve policy decision. Most analysts expect the Fed to leave interest rates unchanged.
Also read: US pauses Iran strikes as Houthis open new front in the Red Sea
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