The price of oil sank more than 9% on Monday on hopes that a pause in attacks between the US and Iran could help lead to a resolution to the conflict, according to BBC. Brent crude, the global benchmark for oil, dipped below $88 a barrel, marking a sharp turnaround from last week when it had risen above $100.
Supply and Demand Drivers
The fall came after the US ambassador to the UN said attacks on Iran had been halted for a second night in a row to give "talks some space", according to BBC. An Iranian army spokesperson said on Sunday that Tehran had halted "retaliatory" attacks in the region in response.
The outbreak of the war between the US and Iran triggered a sharp rise in oil prices as the conflict led to the effective closure of the Strait of Hormuz, a key shipping route which usually carries about 20% of the world's oil and liquefied natural gas (LNG), as reported by BBC. When Iran and the US signed a memorandum of understanding (MoU) in June to halt military operations and reopen the strait, the price of oil fell back to pre-war levels of around $70 a barrel. However, the collapse of the ceasefire earlier this month reignited fears over global energy supplies and pushed the oil price back up. Last week it hit $100 a barrel for the first time since May, with added concerns coming after Houthi militia in Yemen attacked oil tankers in the Red Sea, threatening a key export route that Saudi Arabia had used to bypass the Strait of Hormuz.
Price History
The following table summarises the key price levels and events:
| Period | Brent Crude Price (approx.) | Key Event |
|---|---|---|
| Pre-war (before conflict) | ~$70/bbl | US-Iran tensions |
| June 2026 (after MoU) | ~$70/bbl | Ceasefire and reopening of Strait of Hormuz |
| Early July 2026 (ceasefire collapse) | Rising to $100 | Fears over Hormuz, Houthi attacks |
| Last week (week of July 20) | Hit $100/bbl | First time since May 2026 |
| Monday July 27, 2026 | Below $88/bbl | US and Iran pause attacks |
Market Sentiment
Despite the sharp fall in crude, Susannah Streeter, chief investment strategist at Wealth Club, told BBC that markets were remaining "cautious given the twists and turns during this conflict". She added that "there is still significant uncertainty baked into these prices and a reticence about whether negotiations will lead to a lasting breakthrough".
Broader Economic Impact
The conflict between the US and Iran and its impact on oil has pushed up the cost of fuel such as petrol and diesel in many countries, according to BBC. This often has knock-on effects on other prices, such as food, as businesses pass on the higher costs they are facing to customers, and this can push up the rate of inflation.
Implications for Commodity Traders and Analysts
For commodity traders and procurement teams, the sharp decline in Brent crude prices below $88 offers a potential short-term buying opportunity, but the volatility highlighted by Streeter's comments underscores the need for hedging strategies. The situation remains fluid: the halt in attacks is a positive signal, but the failure of the June MoU and the subsequent resurgence of Houthi attacks on Red Sea tankers remind market participants that supply routes remain vulnerable. Monitoring developments from the US, Iran, and Yemen will be crucial for assessing the sustainability of the price drop.
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