Oil Prices Plunge Over 8% Below $90 After U.S. Suspends Airstrikes, Hit Lowest in Over a Week, But Supply Concerns Remain

International oil prices tumbled sharply on Monday, closing at their lowest levels in over a week, after the United States announced a temporary suspension of airstrikes against Iran, boosting market optimism over diplomatic negotiations. However, with oil shipping routes through the Strait of Hormuz and the Red Sea still affected by geopolitical tensions, market analysts warn that actual crude supply remains tight and prices could continue to swing sharply in the short term.

Brent crude for October delivery fell $8.42, or 8.7%, to settle at $88.36 per barrel—the lowest close since July 17. U.S. West Texas Intermediate (WTI) crude for September delivery dropped $6.70, or 7.5%, to $82.61 per barrel, the lowest since July 16.

Earlier, amid escalating Middle East tensions, Brent crude briefly surpassed the $100 per barrel mark last week. Disruptions to oil transport through the Strait of Hormuz also impacted Saudi Arabia, the world’s largest oil exporter, as its crude shipments to Asia via the Bab el-Mandeb Strait were affected, heightening concerns over supply interruptions.

U.S. Ambassador to the United Nations Mike Waltz, in interviews with American media outlets including Fox News Sunday, said President Trump decided to pause military strikes on Iran to secure more time for diplomatic negotiations.

President Trump also stated on Monday that the U.S. is engaged in 'good negotiations' with Iran and believes there is a 'very good chance' of reaching some kind of agreement. However, he warned that if diplomatic efforts fail, the U.S. would still take 'strong military action'.

Despite market hopes for negotiations, the Middle East situation remains tense. On Monday, Saudi Arabia’s air defense systems intercepted and shot down a drone launched from Iraq. Meanwhile, Yemen’s Houthi rebels claimed they had attacked critical oil supply and transportation infrastructure between eastern Saudi Arabia and the key Red Sea oil export terminal at Yanbu.

John Evans, analyst at energy consultancy PVM, said the market has always hoped for positive developments in the Middle East, but there are still no real signs of genuine improvement.

He noted that while the pause in military action appears positive, it does not mean oil transport will quickly return to normal. He believes that if oil prices continue to fall, it is more likely due to high prices starting to suppress demand, rather than being based on a 'temporary ceasefire without guarantees'.

Market analysts say no formal ceasefire or peace agreement has been signed between the U.S. and Iran, so any diplomatic progress could quickly reverse, leaving the oil market highly sensitive to the latest news.

Alex Hodes, Head of Energy Market Strategy at StoneX, pointed out that while the U.S.-Iran temporary truce continues, physical crude oil shipments in the Middle East remain constrained. After a brief ceasefire in mid-June, shipping volumes never returned to normal, forcing Saudi Arabia to reroute more of its Red Sea crude through the Suez Canal—increasing both transit time and logistics costs.

According to shipping data firm Kpler, fewer than 10 tankers passed through the Strait of Hormuz over the most recent weekend, far below normal levels.

Ole Hvalbye, market analyst at SEB Research, said current traffic is only about 15% of pre-war levels, with normal pre-war shipping volumes around 20 million barrels per day of crude, condensate, and petroleum products. He emphasized that political de-escalation does not immediately add a single barrel of actual crude supply.

Meanwhile, after the Houthis attacked Saudi oil facilities along the Red Sea coast on Sunday, vessel traffic through the Bab el-Mandeb Strait also declined, although a third Chinese supertanker successfully passed through the waterway.

Additionally, Kazakhstan, one of the world’s top ten oil producers, has also faced supply disruptions. Industry sources said that after Russia’s main Black Sea crude export terminal was shut down due to drone attacks, Kazakhstan’s daily crude output temporarily dropped by more than half. However, Kazakhstan’s Ministry of Energy later announced that the Black Sea export terminal of the Caspian Pipeline Consortium (CPC) had resumed crude loading operations, helping to gradually restore some supply.

Overall, the market views U.S.-Iran diplomatic talks as having temporarily eased sentiment, but key energy shipping routes such as the Strait of Hormuz, Bab el-Mandeb, and the Black Sea still face security risks. Until a formal agreement is reached, global crude supply and oil price trends remain highly uncertain.