Crude oil futures plunged on Monday morning after the United States and Iran halted strikes against each other's targets over the weekend, offering the market its first tangible signal of de-escalation in the 13-day conflict. According to the Commodities Feed from ING Think, the price action 'clearly reflects the market’s desperation for positive news.'
Price Plunge on De-escalation Hopes
At 9.32 am on Monday, October Brent oil futures on the Intercontinental Exchange (ICE) were trading at $87.80 per barrel, down by 4.23% from the previous close. September WTI (West Texas Intermediate) crude oil futures on the New York Mercantile Exchange (NYMEX) stood at $84.93 per barrel, a decline of 4.90%. On India's Multi Commodity Exchange (MCX), August crude oil futures fell to ₹8,232 from the previous close of ₹8,604, down 4.32%, while September futures declined to ₹7,948 from ₹8,247, a drop of 3.63%.
| Contract | Previous Close | Current Price | Change (%) |
|---|---|---|---|
| October Brent (ICE) | Not specified | $87.80 | -4.23% |
| September WTI (NYMEX) | Not specified | $84.93 | -4.90% |
| MCX August Crude | ₹8,604 | ₹8,232 | -4.32% |
| MCX September Crude | ₹8,247 | ₹7,948 | -3.63% |
Fundamental Drivers: US-Iran Pause and Houthi Escalation
The sharp drop followed a weekend in which both the US and Iran refrained from further strikes. Mike Waltz, US ambassador to the United Nations, told Fox News Sunday that President Donald Trump had paused attacks on Iran to allow more room for diplomacy. 'He’s giving talks some space, he’s giving it a little bit of room,' Waltz said. Quoting unnamed Iranian officials, a Reuters report indicated that Iran would halt its attacks as long as the US did the same.
'We’re unlikely to see any recovery until there’s clarity on whether this de-escalation is more permanent and whether vessels can navigate the strait without fear of attack.' — Warren Patterson and Ewa Manthey, ING Think
However, Warren Patterson, Head of Commodities Strategy at ING Think, and Ewa Manthey, Commodities Strategist, noted that the reasons behind the pause remain unclear and that there has been no meaningful pickup in vessel flows through the Strait of Hormuz. They added that Brent retreated aggressively, down more than 7% at one stage and briefly below $90 a barrel.
Supply Concerns and Strait of Hormuz
While the US and Iran observed a recess, the Houthis in Yemen escalated their attacks on Saudi Arabia. The Houthis claimed to have struck a number of targets in Saudi territory, including energy facilities in Jazan and Yanbu. According to the ING analysts, amid disruptions in the Strait of Hormuz, Saudi Arabia has been exporting the bulk of its crude oil from Yanbu on the Red Sea. This adds a new risk factor, as further Houthi attacks could threaten alternative export routes.
Demand and Market Outlook
The market's reaction underscores the extreme sensitivity of oil prices to geopolitical developments in the region. The pause in US-Iran hostilities provided temporary relief, but analysts warn that a sustained recovery depends on a lasting de-escalation and the restoration of safe passage through the Strait of Hormuz. With the Houthi threat persisting and no concrete diplomatic breakthrough yet, supply risks remain elevated. Traders will be watching closely for any statements from US or Iranian officials, as well as real-time shipping data, to gauge whether the détente holds.
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