Oil Prices fell sharply on Monday after renewed optimism over a possible peace agreement between the United States, Israel, and Iran raised hopes that global energy supplies could stabilise.
Global benchmark Brent crude dropped 5.5 percent to $97.90 a barrel during morning trading before settling near $97.70 later in the day.
The decline followed comments from US Secretary of State Marco Rubio, who said negotiators had placed a “pretty solid thing on the table” and could reach an agreement to end the conflict as early as Monday.
US President Donald Trump also signalled progress in the talks.
“The negotiations are proceeding nicely,” Trump said, while warning that the outcome would either become “a great deal for all or no deal at all.”
Despite the optimism, Iran cautioned that discussions had not yet reached the final stage.
Iranian foreign ministry spokesman Esmail Baqai said negotiators had agreed on a “large portion of the issues under discussion” but stressed that no final agreement was imminent.
Oil Prices React to Strait of Hormuz Talks
Energy markets have remained volatile since fighting between Iran and Israel escalated on February 28.
The conflict effectively shut down the Strait of Hormuz, one of the world’s most critical energy shipping routes.
Roughly one-fifth of global oil and liquefied natural gas exports normally pass through the narrow waterway.
Trump previously suggested that the proposed agreement would include reopening the Strait of Hormuz, although he offered few details.
The closure of the route triggered fears of severe supply shortages across international markets. As a result, Oil Prices surged sharply during March and April.
Before the war, Brent crude traded near $70 a barrel.
Although prices have dropped in recent days, they remain far above pre-war levels because traders still fear renewed instability in the Gulf region.
Rubio told reporters in New Delhi that negotiations were “still a work in progress.”
“As I said, you know, we thought we might have some news last night,” Rubio said.
Trump later confirmed he had instructed negotiators not to rush the process despite earlier suggesting that an agreement was close.
Middle East Leaders Push for Peace Deal
On Saturday, Trump said he had held discussions with leaders from Saudi Arabia, the United Arab Emirates, Qatar, Egypt, and Turkey regarding a broader regional peace arrangement.
The US president described the talks as productive and linked them to efforts to stabilise the Middle East.
“An agreement has been largely negotiated, subject to finalisation between the United States of America, the Islamic Republic of Iran, and the various other Countries,” Trump wrote on social media.
“Final aspects and details of the deal are currently being discussed, and will be announced shortly,” he added.
Trump also confirmed he had spoken with Israeli Prime Minister Benjamin Netanyahu over the weekend.
According to Trump, the discussion “went very well.”
The US president further pushed Gulf leaders to support the Abraham Accords, which seek to normalise relations between Israel and Arab nations.
Shipping Industry Remains Cautious
Despite falling Oil Prices, shipping experts warned that global supply chains could take months to recover fully.
Lars Jensen, chief executive of Vespucci Maritime and former Maersk director, said shipping firms remain hesitant about returning vessels to the Persian Gulf.
“You are likely going to see shipping lines that have vessels stuck in the Persian Gulf try to get them out,” Jensen told BBC Radio 4.
“But they will be a lot more hesitant to put ships back into the Persian Gulf in case the thing turns south again,” he added.
Jensen also warned that sea mines and damaged infrastructure could continue disrupting shipping operations even if a peace agreement emerges soon.
According to industry analysts, oil facilities damaged during the conflict may require extensive repairs before exports fully recover.
Saul Kavonic, head of energy research at MST Financial, said markets were beginning to see “some light at the end of the tunnel.”
However, he warned that global oil supplies would likely remain tight through 2027.
“But even in the most optimistic scenario from here, oil markets will remain tight through 2027 given the time required to normalise oil flows through the Strait,” Kavonic said.
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Asian Markets Rally on Falling Oil Prices
Financial markets across Asia responded positively to signs of progress in the negotiations.
Japan’s Nikkei 225 index rose above 65,000 for the first time after gaining 3 percent during Monday trading.
Japan and South Korea remain highly vulnerable to disruptions in Gulf energy supplies because both countries import large volumes of oil and gas from the region.
Analysts said hopes of reopening the Strait of Hormuz boosted investor confidence across Asian markets.
Meanwhile, UK and US energy and financial markets remained closed on Monday because of public holidays.
Even so, traders continue monitoring developments closely as negotiators attempt to finalise a long-term peace agreement between Washington and Tehran.
Energy analysts say any collapse in negotiations could quickly reverse recent declines and push Oil Prices higher again.
