Oil slumps as US-Iran pause eases supply fears

Oil prices fell sharply at the start of the week as traders unwound the geopolitical risk premium that had built up during nearly two weeks of continuous US-Iran strikes, with both sides signaling a willingness to return to the negotiating table. Brent crude dropped toward $91 a barrel and WTI slid below $84, while European natural gas also retreated after weeks of gains.

A Pause After 13 Nights of Strikes

The pullback followed an apparent mutual pause in hostilities over the weekend. Iran reported no US strikes for a second consecutive night, while an Iranian military spokesman told state television that since the US stopped attacking, Iran had also ceased its counterattacks. Pentagon sources described operations as in a "pause" state, according to CNN.timesofisrael+1

White House Communications Director Steven Cheung said President Trump "prefers a diplomatic solution, but he keeps all options on the table if Iran continues its terrorist activities in the Strait of Hormuz". A regional official involved in mediation called the mutual pause "a positive sign that helps their efforts to de-escalate," adding that both sides want to return to a temporary cease-fire centered on Iran managing ship passage through the Strait with fewer restrictions.ouralpha

From $100 Oil to Rapid Retreat

The selloff marks a reversal of last week's rally, during which Brent surged above $100 a barrel for the first time since May after Yemen's Houthi movement claimed it had struck two Saudi oil tankers in the Red Sea. WTI had also climbed above $91 during the week as the US Central Command completed its 13th consecutive night of strikes on Iranian military targets. For the week ending Friday, Brent had gained roughly 10%.middleeastmonitor+2

European natural gas prices, which had surged nearly 50 percent over the prior month to above €62 per megawatt hour according to the Financial Times London Stock Exchange, also fell as the pause eased fears over LNG transit through the Strait of Hormuz.ft

Analysts Urge Caution

Despite the relief, analysts warned the pause is fragile. Trump told reporters Friday he had not decided whether to launch major strikes on Iran, saying Tehran was getting "serious" but that the US remains "locked and loaded". Houthi attacks on Saudi shipping infrastructure continue, with the group claiming strikes on two Saudi tankers identified as the Incilia and the Layla. Saudi Arabia retaliated against the Houthis over the weekend.middleeastmonitor+2

Daniela Hathorn, senior market analyst at capital.com, noted that "growing instability around key shipping routes" had rebuilt a "sizeable geopolitical risk premium" into oil markets and that "geopolitical risks are unlikely to fade anytime soon". UBS sees Brent crude falling to $85 a barrel by year-end but acknowledged that disrupted Strait of Hormuz flows will keep the market tight.cnbc