Brent crude oil prices tumbled 9% to below $88 a barrel on Monday after the US suspended its bombing campaign around the strategic Strait of Hormuz, raising hopes of a de-escalation in the conflict that had driven prices above $100 last week. The drop came as the US and Iran paused hostilities following 13 days of fighting, with Iran saying it had stopped retaliatory attacks after two nights without American missiles. The US ambassador to the UN, Mike Waltz, told journalists on Sunday that Donald Trump had decided to pause the attacks to allow more time for diplomacy, while separate reports claimed US military officials had warned the campaign was reaching the limits of its effectiveness and that munitions were dwindling.
The reprieve, however, was met with deep scepticism from market analysts. Ole Hvalbye at SEB Research said: “We’ve been here multiple times since March. And each rally on a leak has faded as substance failed to materialise.” John Evans at PVM added that oil prices would only fall further if there was a meaningful decline in demand, “not questionable mini-ceasefires”, warning that “a stay of military strikes might seem an improvement, but it does not come with any guarantees that oil will soon flow from the area.”
“Oil falls 9% on US pause in Iran strikes but analysts and Trump's warning cast doubt on lasting peace.”
Despite the pause, Trump himself warned of a “powerful” return to war, according to reports on Tuesday, undercutting the fragile calm. The conflicting signals left markets on edge, though the FTSE 100 was set to open higher after Monday’s gains, buoyed by the oil price retreat. Barclays also announced a £1bn share buyback, adding to the positive sentiment.
The oil price slide, which saw Brent crude fall from two-month highs above $100 triggered last week by Iran-aligned Houthi attacks on Saudi tankers in the Red Sea, briefly stabilised around $90 a barrel on Tuesday. But analysts at Deutsche Bank, led by Jim Reid, noted that the 10% increase in Brent last week had “added to fears that the global economy was facing a…” — a warning that the underlying threat to supply from the region remains.