Global oil prices tumbled sharply on Monday after United States President Donald Trump said he would delay planned military strikes against Iranian power plants for five days, citing constructive talks aimed at ending hostilities in the Middle East. The announcement came just hours before a deadline that threatened to escalate the four-week-old war.
Benchmark crude prices reacted immediately. Brent futures dropped $8.92, or 8.0%, to $103.27 per barrel by 12:31pm EDT (1631 GMT), while US West Texas Intermediate fell $7.17, or 7.3%, to $91.06. Earlier in the session, crude futures had plunged nearly 15% before trimming losses after Iran launched new attacks on Israel and denied holding negotiations with Washington.
Market turbulence has intensified in recent weeks, with Brent closing at its highest level since July 2022 on Friday. The extreme price swings pushed both major crude benchmarks’ 30-day futures volatility to the highest levels recorded since April 2022.
In a post on his Truth Social platform, Trump said the United States and Iran had held “VERY GOOD AND PRODUCTIVE” discussions over the previous two days on a “COMPLETE AND TOTAL RESOLUTION OF HOSTILITIES IN THE MIDDLE EAST.”
Meanwhile, Iran’s Revolutionary Guards warned they would target Israeli power plants and facilities supplying US bases across the Gulf if Washington carried out threats to “obliterate” Iran’s energy network.
The ongoing conflict has already inflicted significant damage on major energy installations across the Gulf region and effectively halted most shipping through the strategically vital Strait of Hormuz, a corridor that handles roughly 20% of global oil and liquefied natural gas flows.
Despite the disruption, two tankers carrying liquefied petroleum gas from the United Arab Emirates and Kuwait successfully passed through the strait on Monday en route to India, although overall maritime traffic remained largely blocked.
Energy analysts estimate the conflict has removed between 7 million and 10 million barrels per day of Middle Eastern oil production from the global market, deepening supply shortages.
Fatih Birol, head of the International Energy Agency, warned that the current crisis exceeds the scale of the oil shocks experienced during the 1970s.
The supply crunch has forced policymakers to take emergency steps. The United States temporarily waived sanctions on Russian and Iranian crude already at sea, while Indian refiners signalled plans to resume purchases of Iranian oil. Refiners across Asia are also evaluating similar moves to stabilise supply chains.
However, US Energy Secretary Chris Wright said Washington is “highly unlikely” to release additional crude from the country’s Strategic Petroleum Reserve to calm markets during the conflict.
Supply disruptions continue to ripple across global energy infrastructure. In Russia, the Baltic Sea export hub at Ust-Luga resumed oil loadings after a drone attack alert was lifted, while nearby Primorsk remained closed following air strikes.
Central banks are now assessing the economic fallout from the energy shock. In the United States, Federal Reserve Governor Stephen Miran said it remains too early to determine the inflation impact of the oil surge, although he maintained that interest rate cuts are still necessary to support employment.
In Asia, the Bank of Japan is preparing potential adjustments to its policy language ahead of April, keeping open the possibility of raising interest rates as the weak yen and rising energy costs fuel inflation pressures.
Japan is also considering intervention in crude oil futures markets as the Middle East conflict drives energy prices higher.
Meanwhile, consumer sentiment in the Eurozone fell to its lowest level since late 2023, signalling growing economic anxiety as fuel costs surge.
Global aviation networks have also been hit hard. Major regional hubs in Dubai, Doha and Abu Dhabi remain closed, leaving tens of thousands of travellers stranded.
In China, authorities moved to cushion the domestic impact of rising fuel costs by raising the regulated retail price ceiling for gasoline and diesel, but limited the increase to roughly half the level normally triggered under the country’s pricing mechanism.
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