Oil prices opened sharply lower this week, despite claims from the Houthi group of attacks on Saudi targets, as the US paused airstrikes on Iran over the weekend, alleviating some energy supply risks in the Middle East.
Global benchmark Brent crude fell more than 7% in the first few minutes of trading, briefly dropping below $90 a barrel before recovering to around $92. WTI crude oil futures and European natural gas prices also slumped heavily.
After 13 consecutive days of strikes on Iran, US military operations have been paused since Friday evening, sparking speculation about President Trump's next move. Iran's military has stated that Tehran has suspended its retaliatory actions.
However, Yemen's Houthi group claimed it attacked Saudi Aramco-related facilities in the Red Sea port cities of Jizan and Yanbu on Saturday. Both Riyadh and Saudi Aramco have not confirmed this claim.
As the US-Iran conflict spreads from the Strait of Hormuz to the Red Sea, and with the Houthis threatening to block Saudi ports, Brent oil prices have surged more than 25% this month. The conflict, combined with depleting inventories and rising product prices, has intensified market concerns about a global inflation shock.
"The pause in attacks and reports of progress in negotiations have boosted expectations of further de-escalation, which could help restore shipping through the Strait of Hormuz and the Red Sea, thereby easing pressure on oil markets," said Saul Kavonic, Senior Energy Analyst at MST Marquee.
Kavonic added, however, "Key issues, such as Iran's control of the Strait, its missile program, and nuclear ambitions, remain difficult to resolve, and any ceasefire is highly likely to be temporary."
Brent crude futures for September delivery fell 5.1% to $91.89 a barrel. WTI crude futures for September delivery dropped 5% to $84.81 a barrel.
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