Oil Prices Plummet on Trump's Pause, but Disruption Remains a Threat

Oil prices plummeted by as much as 7% on Monday after US President Donald Trump announced a pause in plans to attack Iran, sparking hopes for negotiations to reopen the Strait of Hormuz.

The Brent crude benchmark pared its decline to trade 5.11% lower at $83.44 per barrel by 4:08 am GMT, while West Texas Intermediate fell 5.79% to $79.77. Both benchmarks had surged over 20% in July due to concerns about shipping disruptions around the Gulf.

However, OPEC+ added to the bearish mood by approving a September production quota increase of 188,000 barrels per day. But analysts warn that tanker traffic remains subdued, attacks continue, and no agreement guarantees safe passage through one of the world's key energy routes.

Goldman Sachs has outlined a scenario in which continued Hormuz disruption could push Brent towards $120, while JPMorgan estimates that every additional month of interrupted supply could add roughly $7 to $8 per barrel to Brent. However, Goldman still expects tensions to ease, and expanding supply outside the conflict zone could put downward pressure on prices.