Global oil pricesslid sharply on Monday as optimism rose over a potential peace deal between the United States and Iran, raising expectations that the conflict affecting the Strait of Hormuz could soon ease. Brent crude fell 5.5% to $97.90 a barrel, while US-traded crude dropped 5.9% to $90.93, reflecting market relief after weeks of volatility.
Progress in Negotiations
US Secretary of State Marco Rubio said during a visit to India that negotiators had a “pretty solid thing on the table” and suggested an agreement might be reached imminently. Meanwhile, President Donald Trump confirmed that he instructed negotiators not to rush the process, emphasizing that any deal must fully prevent Iran from obtaining nuclear weapons.
The Strait of Hormuz, a narrow waterway through which roughly 20% of the world’s oil and LNG passes, has been effectively blocked since February 28 due to the conflict. Its closure has caused large swings in global energy markets, sending oil prices to levels not seen in years.
Market Reactions
Asian stock markets responded positively.Japan’s Nikkei 225 rose above 65,000 for the first time after gaining 3%, with investors hopeful that reopening the strait would ease energy supply pressures. Other regional markets in South Korea and across Asia also saw gains, reflecting expectations of improved energy availability and stability in global shipping.
Despite the decline, oil prices remain significantly higher than pre-conflict levels of around $70 a barrel. Analysts warn that while a ceasefire and ongoing negotiations provide optimism, logistical and structural challenges could keep markets tight.
Caution Despite Optimism
Saul Kavonic, head of energy research at MST Financial, noted that even in the most optimistic scenario, normalizing oil flows will take time, reports BBC. Repairing damaged infrastructure, resuming full shipping operations, and rebuilding depleted global oil reserves are likely to keep energy markets constrained well into 2027.
Shipping companies also remain cautious. Lars Jensen, chief executive of Vespucci Maritime, explained that vessels currently stranded in the Persian Gulf may be slow to return due to ongoing security risks, including potential sea mines. He emphasized that even after a deal, it could take months for supply chains to return to pre-war conditions.
Implications for Energy-Dependent Nations
Countries heavily reliant on Gulf energy, particularly Japan and South Korea, have been directly affected by the conflict. While relief is expected if the strait reopens, markets remain sensitive to sudden geopolitical shifts, meaningenergy price volatility could continue despite progress in talks.
Markets are cautiously optimistic, but uncertainty remains. Final agreements are still pending, and both US and Iranian positions require careful alignment. Analysts advise that while oil prices may ease in the short term, the combination of infrastructure challenges, cautious shipping operations, and broader geopolitical risks will likely maintain elevated prices and volatility for months to come.
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