By Gloria Nosa
Oil prices experienced a sharp decline of over 5% on Monday following the announcement of a ceasefire agreement between Israel and Iran, brokered by the United States. The surprise diplomatic breakthrough significantly eased geopolitical tensions in the Middle East — a region critical to global energy supplies — leading to immediate reactions across international markets.
Brent crude, the global benchmark, fell to $76.80 per barrel, while U.S. West Texas Intermediate (WTI) dropped to $72.40 per barrel, marking their steepest single-day losses in nearly two months. The downturn reflects a collective market sigh of relief as fears of a prolonged regional conflict — which could have disrupted oil shipments through the Strait of Hormuz — subsided.
The ceasefire, facilitated by intensive U.S. shuttle diplomacy in recent weeks, reportedly includes terms agreed upon by both Tehran and Jerusalem to de-escalate military activities, cease airstrikes, and reopen diplomatic backchannels. This development comes after months of rising hostilities, including missile exchanges, cyberattacks, and threats to strategic shipping lanes.
Energy analysts say the truce has removed a significant “war premium” that had been baked into oil prices. “Markets were pricing in the possibility of a wider regional war, which could have driven oil above $100 per barrel,” said Daniel Moore, a senior analyst at EnergyRisk Advisors. “Now that immediate military risks have receded, traders are correcting for a more stable supply outlook.”
Beyond the geopolitical relief, the drop in oil prices is expected to have short-term economic benefits for oil-importing nations, potentially lowering fuel prices and easing inflationary pressures. However, for major oil-producing countries and companies, the sudden dip may weigh on revenues and share prices.
Despite the positive response, some market watchers remain cautious. They warn that the ceasefire could be fragile, given the history of mistrust and volatility in the region. “It’s a significant step, but the situation remains fluid,” noted Fatima Rahmani, a Middle East policy expert. “Any misstep could reignite tensions and reverse the current trend in energy markets.”
Meanwhile, the White House hailed the agreement as a diplomatic victory. In a statement, U.S. President Joe Biden praised both Israeli and Iranian leaders for their “courageous decision to pursue peace in the interest of regional and global stability.”
As markets continue to digest the implications of the ceasefire, all eyes will be on how long the truce holds — and what it means for long-term energy strategies and Middle East politics. For now, though, the oil market is breathing easier.
