Oil prices dropped sharply on Monday, falling to their lowest levels in two weeks as markets reacted to signs of progress in peace negotiations between the United States and Iran, despite continuing disagreements over critical issues including the Strait of Hormuz.
Brent crude futures fell by $5.85, or 5.7 per cent, to $97.69 a barrel by 0343 GMT, while US West Texas Intermediate crude declined $5.75, or 6 per cent, to $90.85 a barrel. Both benchmarks touched their weakest levels since May 7 during early trading.
The decline followed remarks from US President Donald Trump over the weekend suggesting Washington and Tehran had made substantial progress toward a peace arrangement that could reopen the Strait of Hormuz. Before the conflict, the narrow waterway handled roughly one-fifth of global oil and liquefied natural gas shipments, making it one of the world’s most important energy corridors.
Trump said on Saturday that the two sides had “largely negotiated” an understanding. His comments fuelled hopes that shipping through the strait could eventually resume, easing supply concerns that have pushed energy prices higher in recent months.
Analysts said the market welcomed the prospect of reduced geopolitical tensions, although many warned against assuming a quick resolution.
“Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some near-term oil price relief,” said Saul Kavonic, an analyst at MST Marquee.
The optimism was tempered by continuing divisions between Washington and Tehran. Trump indicated on Sunday that he had instructed US representatives not to rush negotiations, suggesting difficult issues remain unresolved.
Warren Patterson, head of commodities strategy at ING, said traders were likely to remain cautious.
“We’ve been at this stage before, only for talks to break down. Therefore, the market will likely be more cautious about overreacting,” Patterson said.
Even if a breakthrough is reached, analysts noted that restoring normal oil flows through the Strait of Hormuz may take considerable time. Damage to oil and gas infrastructure during the conflict means repairs could delay any return to full operations.
Priyanka Sachdeva, an analyst at Phillip Nova, said questions remain over how quickly global disruptions can be resolved.
“The longer the crisis stretches, the more debatable it becomes whether world leaders genuinely want a quick end to disruptions,” she said.
Meanwhile, rising domestic energy prices in the United States prompted producers to increase drilling activity. Energy firms added oil and natural gas rigs for a fifth consecutive week, marking the first such streak since February 2025.
According to Baker Hughes, the rig count rose by seven to 558 in the week ending May 22, the highest level since June 2025. Despite the increase, the total remained eight rigs below levels recorded a year earlier.
Sachdeva said markets appeared to be searching for stability following recent volatility.
“Momentum indicators suggest markets are attempting to stabilise after last week’s aggressive selloff, but conviction remains weak,” she said.
