Global oil prices fell sharply on Monday as a pause in hostilities between the United States and Iran renewed optimism that both countries could return to ceasefire negotiations and reopen the strategic Strait of Hormuz.
Brent crude dropped 5.2 per cent to around $92 per barrel, while U.S. West Texas Intermediate (WTI) crude declined 5.4 per cent to $84.45 per barrel, following signs of easing tensions after nearly two weeks of renewed conflict.
After 13 days of attacks on targets inside Iran, the United States refrained from launching fresh strikes over the weekend. US President Donald Trump’s envoy to the United Nations said the president was “giving talks some space”, signalling a possible diplomatic opening.
Iran also announced it would suspend retaliatory attacks against neighbouring countries, providing temporary relief for Gulf shipping operations and the global oil market.
The latest confrontation began after Iran targeted ships navigating Omani waters in the Strait of Hormuz, ending a fragile truce and triggering a fresh cycle of military escalation between Tehran and Washington.
The conflict later spread beyond the vital shipping route, with Iran-backed Houthi rebels in Yemen launching attacks on Saudi vessels in the Bab al-Mandeb Strait, another key maritime corridor linking the Red Sea.
The unrest sent crude prices soaring, with Brent crude climbing above $100 per barrel last week for the first time since May. However, confirmation that shipping activities continued in the Red Sea helped ease market concerns before the weekend.
Fresh optimism emerged after President Trump chose not to authorise additional military strikes, while Iran announced progress in discussions with Oman over managing the Strait of Hormuz.
According to Iranian Foreign Ministry spokesman Esmaeil Baqaei, the talks focused on “common principles and operational mechanisms” to guarantee safe navigation through the strategic waterway while respecting the sovereignty of both countries.
Meanwhile, reports suggested Pakistan was considering efforts to revive US-Iran peace negotiations following diplomatic initiatives backed by China.
The improved outlook weighed heavily on oil prices, with Brent crude briefly falling below $90 per barrel before recovering some losses.
National Australia Bank economist Sally Auld said the latest developments suggested both sides were beginning to recognise that oil prices above $100 per barrel encouraged efforts to de-escalate tensions.
The easing geopolitical risks also reduced fears of renewed inflationary pressure and further global interest rate hikes, helping lift sentiment across most stock markets.
Despite the positive momentum, investor concerns over the sustainability of the artificial intelligence boom continued to pressure technology stocks worldwide.
South Korea’s market led losses, with major chipmakers SK hynix and Samsung Electronics among the biggest decliners.
Taipei, Singapore and Jakarta also traded lower, with Indonesian markets additionally affected by the unexpected resignation of central bank governor Perry Warjiyo, who cited personal reasons.
Tokyo ended higher overall despite heavy selling in technology shares including Advantest, Kioxia, and Tokyo Electron. Markets in Hong Kong, Sydney, Shanghai, Wellington and Manila also posted gains.
Investors are now closely watching this week’s earnings reports from SK hynix, Samsung and Japan’s Kioxia, while US technology giants Microsoft, Meta, Apple and Amazon are also expected to release their latest financial results.
Analysts say investors will focus particularly on the companies’ future outlook and capital expenditure plans.
KCM Trade analyst Tim Waterer noted that traders remain cautious about the massive investments flowing into artificial intelligence, saying markets are still questioning how long it will take before companies begin generating meaningful returns from those investments.
Attention is also shifting to this week’s US Federal Reserve policy meeting as investors assess whether recent geopolitical tensions and easing inflation could influence interest rate decisions.
Although expectations for another rate increase have strengthened in recent days, analysts widely expect policymakers to keep rates unchanged when they conclude their meeting on Wednesday.
However, Allianz Global Investors strategist Jenny Zeng said, “While the (policy board) is likely to remain on hold in July, we continue to expect 50 basis points of tightening by year-end.”
In corporate news, Chinese memory chip manufacturer CXMT surged 470 per cent during its market debut in Shanghai, briefly overtaking banking giant ICBC to become mainland China’s most valuable listed company.
Bloomberg reported that the Anhui-based semiconductor company raised $9.8 billion through its initial public offering, making it the largest technology share sale ever completed on China’s mainland.
Key Market Figures (Around 0230 GMT)
- West Texas Intermediate (WTI): Down 4.3 per cent to $85.45 per barrel
- Brent North Sea Crude: Down 3.9 per cent to $92.97 per barrel
- Tokyo – Nikkei 225: Up 0.2 per cent to 64,764.01
- Hong Kong – Hang Seng Index: Up 0.8 per cent to 25,160.38
- Shanghai Composite: Up 0.3 per cent to 3,826.19
- Euro/Dollar: Up to $1.1408
- Pound/Dollar: Up to $1.3357
- Euro/Pound: Up to 85.41 pence
- Dollar/Yen: Down to 163.54 yen
- Dow Jones Industrial Average: Up 0.5 per cent to 51,947.25
- FTSE 100: Up 0.9 per cent to 10,736.23
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