Crude Oil Falls as US-Iran Tensions Ease, Boosting Hormuz Shipping Optimism

Global oil prices declined sharply after signs of a pause in hostilities between the United States and Iran raised hopes that tensions in the Middle East may be easing. The drop in crude prices reflects growing optimism among investors that the risk of major disruptions to oil exports through the Strait of Hormuz a vital shipping route for nearly a fifth of the world’s oil supply

Oil prices fell sharply on Monday after signs of renewed diplomatic progress between the United States and Iran eased fears of further disruptions to global energy supplies.Brent crude dropped by more than seven percent during early trading, briefly slipping below $90 per barrel after surging above $100 last week amid escalating tensions in the Middle East.

The latest decline followed President Donald Trump’s decision to delay additional military strikes and Iran’s announcement that talks with Oman had made progress on managing the Strait of Hormuz. According to Iranian Foreign Ministry spokesman Esmaeil Baqaei,

the discussions centered on establishing common principles and operational mechanisms to ensure the safe passage of ships through the strategic waterway while respecting the sovereignty of both nations.Adding to the optimism, reports indicated that Pakistan is exploring the possibility of reviving US-Iran peace negotiations, building on diplomatic efforts backed by China.

The recent conflict intensified earlier this month after a fragile ceasefire collapsed when Iran attacked commercial vessels transiting the Strait of Hormuz, triggering a fresh cycle of hostilities. The escalation disrupted diplomatic efforts between Washington and Tehran before spreading beyond the critical oil route.

The situation worsened when Iran-backed Houthi rebels in Yemen targeted Saudi vessels in the Bab al-Mandeb Strait, a vital shipping lane connecting the Red Sea to global trade routes. The attacks fueled concerns over potential supply disruptions, sending crude oil prices soaring to their highest levels since May.

Despite the ongoing tensions, reports that commercial shipping continued through the Red Sea helped calm market fears, prompting investors to scale back some of the sharp gains recorded in oil prices.

The positive developments eased worries about a reignition of inflation and a fresh round of interest rate hikes, in turn helping equity markets higher.However, concerns about the sustainability of the AI boom and questions over the eye-watering sums pumped into the sector continue to dog traders, as tech firms bear the brunt of selling.

Seoul, which has led the rout in recent weeks, rose one percent with chip giants SK hynix and Samsung enjoying some much-needed buying interest. Tokyo rose, though tech firms Advantest and Kioxia suffered more hefty selling pressure.

Hong Kong, Sydney, Shanghai, Wellington, Singapore, Mumbai and Manila were also up. London, Paris and Frankfurt rose at the open.Taipei and Bangkok fell, while Jakarta was also in retreat following the surprise resignation of Indonesian central bank boss Perry Warjiyo citing personal reasons.

Traders will be keenly awaiting the release of earnings from SK hynix, Samsung and Japan’s Kioxia this week, while US titans Microsoft, Meta, Apple and Amazon are also due, with focus on their outlooks and spending plans.

Tim Waterer of KCM Trade said: “Traders remain somewhat nervy about the scale of the capex being committed, given lingering concerns over how long the return-on-investment phase may take to fully materialise.”

Also in view this week is the Federal Reserve’s policy decision in light of the latest US-Iran flare-up and recent data indicating inflation easing.Bets on a hike have risen over the past week, though analysts expect officials to stand pat on Wednesday.

However, Jenny Zeng at Allianz Global Investors warned: “While the (policy board) is likely to remain on hold in July, we continue to expect 50 basis points of tightening by year-end.”

In company news, China’s leading memory chipmaker CXMT jumped 530 percent on its market debut in Shanghai to take it past megabank ICBC as the mainland’s most valuable company, before later paring the gains to end up 465 percent.

The breathtaking surge came after the Anhui-based company had raised $9.8 billion in a blockbuster initial public offering, Bloomberg News reported, making it China’s biggest mainland tech share sale.

West Texas Intermediate: DOWN 5.7 percent at $84.20 a barrel

Brent North Sea Crude: DOWN 6.1 percent at $90.89 per barrel

Tokyo – Nikkei 225: UP 0.5 percent at 64,931.19 (close)

Hong Kong – Hang Seng Index: UP 1.0 percent at 25,207.18 (close)

Shanghai – Composite: UP 1.2 percent at 3,858.24 (close)

London – FTSE 100: UP 0.5 percent at 10,786.07

Euro/dollar: UP at $1.1400 from $1.1373 on Friday

Pound/dollar: UP at $1.3341 from $1.3323

Euro/pound: UP at 85.45 pence from 85.34 pence

Dollar/yen: DOWN at 163.46 yen from 163.84

New York – Dow: UP 0.5 percent at 51,947.25 (close)