Oil Prices Plummet as US-Iran Pause Fuels Diplomatic Breakthrough Hopes

Oil prices took a sharp hit on Monday after the US and Iran refrained from launching fresh strikes over the weekend, raising hopes of a diplomatic breakthrough in the Middle East.

Brent crude futures fell $4.37, or 4.52%, to $92.41 a barrel, while US West Texas Intermediate (WTI) crude dropped 5.23% before trading $4.30, or 4.81%, lower at $85.01 a barrel.

The decline came after the US and Iran paused their military operations for a second straight day, following two weeks of attacks that had driven oil prices up to their highest levels since May.

Hopes are rising that diplomacy may be able to de-escalate the conflict, with IG Markets analyst Tony Sycamore saying '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, shipping through key trade routes remained subdued, with fewer than 10 commodity vessels passing through the Strait of Hormuz each day over the weekend.