Oil prices fell sharply on Monday United States and Iran The pause raised hopes that tensions in the Middle East could be eased. The pause in fighting also boosted investor confidence, with stocks rising as traders hoped energy supplies in the region would improve. Despite the calm conditions, the Gulf shipping route remains risky and ships continue to face dangerous conditions. Oil prices surged throughout much of July after a ceasefire between the United States and Iran collapsed and fighting resumed.
Brent crude oil prices climbed above $100 a barrel last week after Yemen’s Iran-backed Houthi rebels threatened to block Saudi Arabia’s ports on the Red Sea, widening the conflict. President Donald Trump’s decision to avoid a major escalation of the war, at least temporarily, has improved market sentiment and revived hopes for a diplomatic solution. Donald Trump’s UN envoy says the US president is “giving some space to negotiations”.
Oil prices plummet
Global oil benchmark Brent crude for September delivery fell more than 8% to around $89 a barrel. The more actively traded Brent crude oil contract for October delivery fell by a similar amount to around $85 a barrel. U.S. benchmark West Texas Intermediate (WTI) crude for September delivery fell more than 7% to about $82 a barrel.
Oil prices fell as traders reacted positively to a pause in military action between the United States and Iran. However, analysts said the market remains concerned about disruption to major routes, especially Strait of Hormuz and Bab el-Mandeb Strait.
Middle East conflict still worries markets
The United States and Iran resumed hostilities earlier this month, ending a fragile truce after Iran attacked ships transiting the Strait of Hormuz. A new wave of attacks triggered a round of retaliation that sent crude oil prices sharply higher. While the latest pause has reduced immediate fears, experts warn the conflict is not over yet.
According to Yahoo Finance, XTB Research Director Kathleen Brooks said, “Although the situation in the Middle East has calmed down, the problem has not yet been resolved, and it may be difficult for oil prices to fall below US$85 per barrel at this stage.”
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Transport remains disrupted
Despite the pause in fighting, shipping traffic in the Strait of Hormuz remains near its lowest level in more than two months. Only 11 ships passed through the Strait of Hormuz on Sunday, compared with an average of more than 130 ships per day before the war, according to maritime data firm Kpler.
The number of ships was up slightly from six on Saturday, but still well below normal. The threat of a blockade of Saudi ports by the Houthis has forced several Saudi ships heading to the Bab el-Mandab Strait to change course. Some Saudi ships have rerouted through the Suez Canal instead of using the Red Sea route.
Using the Suez Canal and sailing around the Cape of Good Hope adds about four weeks to the journey to transport Saudi crude to Asia. It is too early to fully gauge the impact of the Houthi threat on Red Sea shipping. Analysts have warned that if more ships avoid the Bab el-Mandeb Strait, global energy supplies could tighten further, The New York Times reported. At least three oil tankers were attacked in the Red Sea last week, including one reported late Friday.
stock market rises
Global stocks rose as investors welcomed a temporary pause in the conflict. U.S. S&P 500 futures rose 0.9%, suggesting Wall Street is expected to open higher. Chinese stocks rose more than 1% on Monday. Japan’s Nikkei 225 ended the day up 0.5%.
In Europe, the Stoxx 600 rose 0.7%. Frankfurt stocks rose more than 1.5%, while London and Paris stocks were also higher. According to Yahoo Finance, Asian markets including Tokyo, Seoul, Hong Kong and Shanghai all recorded positive gains.
Inflation and central banks take center stage
Falling oil prices have eased concerns that inflation could rise again due to expensive energy. Reduced inflation concerns also eased concerns that the central bank might raise interest rates again. The Fed is widely expected to keep interest rates on hold at its policy meeting on Wednesday.
The Bank of England is also expected to keep interest rates unchanged on Thursday. “Policymakers face a difficult trade-off between evidence that inflation has slowed and signs that it is heading higher,” said Jim Reed, managing director at Deutsche Bank. oil price Yahoo Finance said there could be a longer-lasting inflationary shock.
Corporate profits are also the focus
In addition to geopolitical developments, investors are also focused on a busy week of corporate earnings reports. South Korean chipmakers SK Hynix, Samsung and Japan’s Kioxia are scheduled to announce results this week. US technology giants Microsoft, Meta, Apple and Amazon will also release earnings reports, with investors paying close attention to their future spending plans and prospects.
Chinese chipmakers draw attention
Chinese memory chip maker Changxin Memory soared more than 500% on its Shanghai stock market debut, eventually closing up 465%. The company raised $9.8 billion in its initial public offering, making it the largest technology stock offering in mainland China, according to Bloomberg.
Gasoline prices remain high
U.S. gasoline prices remain high despite a sharp drop in crude oil prices. The national average price for regular gasoline remained at $4.11 a gallon on Monday, the same as the previous two days, according to AAA.
Gasoline prices have climbed back above $4 a gallon last week after the fighting between the United States and Iran resumed. Experts note that retail fuel prices typically do not change immediately with crude oil prices, but often after a delay of several days. The average price of diesel fuel remained at $5.30 per gallon, about 41% higher than when the conflict began.
