Oil prices dropped sharply on Monday after US President Donald Trump announced a five-day delay in any military strikes on Iranian power plants, easing fears of a rapid escalation in the Middle East conflict, now in its fourth week.
Brent crude futures fell 7.2% to trade at approximately $104.10 a barrel by late morning, having earlier slid as much as 15% to $96 a barrel. US West Texas Intermediate (WTI) crude declined 7.8% to $90.55 after losing 13.5% to a session low of $85.28.
The sudden easing of tensions prompted gains across European stock markets, with shares in Dublin, Paris, and Frankfurt moving higher. Bond yields fell as the cost of borrowing for Ireland, the US, and several European countries dropped.
The announcement came just hours before the deadline Trump had set for Tehran to “fully open” the Strait of Hormuz to all shipping, a critical route handling roughly 20% of the world’s oil and liquefied natural gas flows. Earlier warnings from the US president threatened to destroy Iranian power plants if the Strait remained closed.
The situation had already raised concerns about global energy supply, with analysts estimating a loss of 7 million to 10 million barrels per day of oil production across the Gulf region. Iranian Revolutionary Guards had responded to Trump’s threat by warning they would target Israeli power facilities and US energy infrastructure in the Gulf.
“The delay in military action has temporarily reduced the risk of supply shocks,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers. “It is important to be nimble. Actions should be temporary. Short-term supports, if necessary, are the way to go.”
European governments are already considering measures to cushion the impact of high fuel prices. In Ireland, coalition leaders are expected to meet later on Monday to discuss options including excise reductions on petrol and diesel, extending the fuel allowance, and potential rebate schemes for hauliers.
Oil markets remain highly sensitive to developments in the Gulf, where ongoing strikes and retaliatory threats have damaged key energy facilities. The disruption has caused shipping delays through the Strait of Hormuz and heightened volatility in crude prices over the past month.
The drop in oil prices on Monday signals investor relief at the temporary reprieve but analysts warn that the underlying risk remains. Any renewed escalation in the region could quickly reverse the gains, triggering another surge in energy costs worldwide.
The Middle East conflict has had widespread effects on global energy markets, forcing governments and businesses to prepare for further uncertainty in oil and gas supplies, while consumers face heightened costs at the pump.
