Oil prices fell below $100 a barrel on Monday as traders reacted to signs that the United States and Iran are edging toward a peace deal, a shift that sent Brent crude futures down 6% to $97.43 a barrel, their lowest level in two weeks.
The move came as stock markets rose on hopes that a framework has been negotiated between Washington and Tehran, even though the two sides remain at odds over Iran’s blockade of the strait of Hormuz. An Iranian government spokesperson said an agreement was not imminent, a reminder that the market is still trading on expectation, not resolution.
For now, the price slide marks a sharp turn from the shock that followed the near three-month US-Israeli war on Iran, when the closure of the strait sent energy prices soaring after the February 28 strikes on Tehran. On Monday, two tankers carrying liquefied natural gas were exiting the strait heading to Pakistan and China, and a supertanker carrying Iraqi crude left the Gulf bound for China on Saturday after being stranded for almost three months.
Analysts said the real test is whether those movements turn into a sustained reopening of the waterway. UBS analyst Giovanni Staunovo said physical oil flows should be the key factor to watch, noting that flows through the strait remain restricted. Warren Patterson warned that the market has seen this before, with talks breaking down after raising hopes of a breakthrough.
Even after Monday’s drop, oil remains far above the roughly $70 a barrel level it traded at before the Iran war, underscoring how much risk premium is still built into the market. Stephen Innes said investors reacted quickly because inflation fears and expectations for tighter central bank policy had already been baked into prices, which helps explain why bond futures, gold and equity futures all moved higher as the energy shock eased.
The wider market mood echoed that change. Japan’s Nikkei rose nearly 3% on Monday, the pan-European Stoxx 600 index gained 1%, the dollar slipped 0.3% against a basket of major currencies and the pound climbed almost 0.6% to $1.3506, its highest level since mid-May. Markets are also expecting the Bank of England to raise rates twice this year, a bet that could be reshaped if energy prices keep falling.
The bigger question is how quickly the market can trust the flow of oil again. Analysts say even if the strait reopens, damaged energy infrastructure in Qatar and elsewhere still needs to be repaired, which means a return to normal supply could take months rather than days.
