Oil prices slumped on Monday as the US and Iran ceased hostilities after two weeks of strikes, raising hopes of a negotiated peace in the region, even as Yemen’s Houthi militia stepped up attacks on vessels in the Red Sea and hit Saudi energy assets.
Brent, the benchmark for more than two-thirds of global oil, slipped as much as 7 per cent within minutes of markets opening, but pared early losses to trade 4.17 per cent lower at $92.74 a barrel at 7.45am UAE time. West Texas Intermediate, slipped 4.46 per cent to $85.15 a barrel.
After hitting military targets in Iran for 13 nights straight, the US paused attacks on Friday. There is no explanation from Washington on why US President Donald Trump has stopped the latest round of strikes, raising questions over his next move. Tehran has also suspended its response and no fresh strikes on US interests were reported since late Friday.
“Strikes have been put on hold in recent days, reportedly as US strategists rethink their effectiveness,” Kyle Rodda, senior financial market analyst at Capital.com, said. “The battle appears intractable and requires a major compromise from either the US or Iran to resolve.”
However, to kick off the week, crude prices are poised to dip “on hopes some sort of ceasefire, however temporary or tenuous, could materialise”, he added.
Wild swings
Prices of crude have swung wildly since the beginning of the conflict on February 28. Brent gave up all the war premium earlier this month and traded below the prewar $72 per barrel mark as the US and Iran worked on a permanent peace deal after agreeing to a 60-day ceasefire last month.
That deal, however, unravelled after Iran attacked oil tankers in the Strait of Hormuz, killing a sailor. The US deemed the attack as a breach of the memorandum of understanding between the warring sides and launched the latest round of strikes aimed at degrading Tehran’s capabilities to strike ships in the narrow waterway.
Iran has retaliated with waves of drone and missile strikes on American interests in the Gulf, Jordan and Iraq, embroiling the region once again into the conflict.
The flare-up pushed Brent prices 30 per cent higher in July alone, with the benchmark advancing more than 10 per cent last week after climbing to almost $102 per barrel.
Houthi threat
While the pause in hostilities in the Gulf has raised hopes for peace in the region, traffic through the Strait of Hormuz has declined to a trickle. Multiple attacks on oil tankers in the Red Sea have also restricted crude supplies through the Bab Al Mandeb strait.
Iran-backed Yemeni Houthis opened up a new front last week, announcing an embargo on Saudi ports and shipping, warning global shipping operators not to load or discharge cargo at Saudi ports.
Houthis followed through with their threats of attacking ships transiting the Bab Al Mandeb strait, damaging several Saudi tankers in the Red Sea.
A number of vessels have also made U-turns to avoid the conflict and have chosen the longer and costlier Suez Canal route.
Saudi Arabia, Opec’s biggest oil exporter, has loaded no crude for export via Bab Al Mandeb from its west coast since the Houthi maritime embargo took effect.
Crude oil supply to the kingdom’s Asian buyers from the Suez Canal, have more than doubled in the week of the embargo to 1.06 million barrels per day, up from the week starting July 13, according to Kpler data.
Both Hormuz, the chokepoint through which 20 per cent of the world’s oil and gas transited before the war, and Bab Al Mandeb are two vital trade routes for global energy supplies.
Though Houthi military capabilities do not match that of Iran, they managed to severely disrupt commercial shipping operations between 2023 and 2025 when they attacked more than 100 ships.
On Saturday, the Houthis claimed to have launched attacks on Aramco facilities in the Saudi cities of Jizan and Yanbu.
The recent attacks by the rebels on Saudi Arabia’s infrastructure are the first direct attack on the kingdom's oil infrastructure since 2022. Neither Aramco nor the Saudi government have confirmed the attacks.
