Oil prices tumbled 5% on Monday after the U.S. and Iran paused strikes over the weekend after two weeks of attacks, raising hopes of a diplomatic solution that would de-escalate the conflict and allow shipping to resume in the Strait of Hormuz.
Brent crude futures fell $4.89, or 5.05%, to $91.89 by 0009 GMT after briefly slipping under the key support level of $90 earlier in the session.
U.S. West Texas Intermediate crude was at $84.64 a barrel, down $4.67, or 5.23%.
Both contracts are trading at their lowest levels in nearly a week after rising for the past three weeks.
Brent had reached $100 per barrel as the conflict, which reduced oil shipments via the Strait of Hormuz, spilled over to the Red Sea, hindering exports from the world's top exporter, Saudi Arabia, via the Bab el-Mandeb strait to Asia.
The U.S. ambassador to the United Nations, Mike Waltz, told "Fox News Sunday" and other U.S. media that President Donald Trump had decided to pause U.S. attacks to allow more time for diplomacy.
"Hopes are rising that a genuine diplomatic path may be opening," IG markets analyst Tony Sycamore said in a note.
"A return to the 14-point MOU (memorandum of understanding) with a little more clarity around control of the Strait of Hormuz would be a solid starting point."
Despite the pause in attacks, fewer than 10 commodity vessels passed through the Strait of Hormuz daily during the weekend, shipping data from Kpler showed.
In addition, ship traffic through the Bab el-Mandeb strait fell on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker exited via the Bab el-Mandeb strait.
"Any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring more empty ships into the Strait," MST Marquee analyst Saul Kavonic said.
Source: Reuters
-Agencies
