Oil prices fell sharply in early trading on Monday after United States President Donald Trump halted a planned military strike against Iran, easing immediate fears of a wider conflict in the Middle East and raising hopes of renewed diplomatic efforts to reopen the Strait of Hormuz.
As at the time of writing 5:38 a.m. (WAT), Brent crude was trading at $83.44 per barrel, down 5.11 per cent, while West Texas Intermediate (WTI) crude fell 5.82 per cent to $79.74 per barrel.
The sharp decline follows weeks of heightened volatility across the global oil market. Throughout July, both Brent and WTI rallied by more than 20 per cent as escalating hostilities between the United States and Iran, coupled with Houthi attacks on shipping and restrictions around key export routes, fuelled fears of prolonged supply disruptions through the Strait of Hormuz and the Red Sea.
Market sentiment shifted over the weekend after Trump announced that the United States would suspend what he described as a major military operation against Iran following assurances from regional leaders that diplomatic negotiations were close to producing a breakthrough. The decision immediately reduced geopolitical risk premiums that had been supporting crude prices.
The prospect of easing tensions also renewed optimism over the reopening of the Strait of Hormuz, a strategic waterway through which roughly one-fifth of global oil supplies pass. Any sustained return to normal shipping operations is expected to improve global crude availability and reduce concerns over supply interruptions.
Shipping activity offered mixed signals. Two Saudi oil tankers successfully passed through the Bab el-Mandeb Strait during the weekend, indicating that some crude exports continue despite heightened regional tensions. However, fresh attacks on commercial vessels reported by the United Kingdom Maritime Trade Operations agency underscored that maritime security risks remain elevated.
Oil prices also came under additional pressure after OPEC+ approved a production quota increase of approximately 188,000 barrels per day for September, completing another phase of the gradual reversal of its voluntary production cuts. Although actual production increases remain constrained by regional disruptions, the decision reinforced expectations of additional supply entering the market.
Meanwhile, diplomatic discussions between Iran and Oman over a new shipping arrangement through the Strait of Hormuz are said to be in their final stages. Iranian authorities have maintained that vessels will no longer use the previous southern shipping corridor off Oman's coast, signalling that even if the waterway fully reopens, shipping routes across the Gulf could undergo significant adjustments.
For Nigerian downstream market, the decline in international crude prices could provide temporary relief to marketers after weeks of rising replacement costs. However, industry operators are expected to remain cautious as any renewed military escalation or disruption to Gulf exports could quickly reverse the current downward trend and send crude prices higher again.