Oil prices tumble 6pc as hopes rise for US-Iran peace deal

SINGAPORE: Oil prices fell nearly six per cent on Monday, hitting their lowest level in two weeks, after optimism grew that the United States and Iran were moving closer to a peace agreement that could reopen the Strait of Hormuz.

Brent crude futures dropped $5.85, or 5.7 per cent, to $97.69 a barrel by 0343 GMT, while US West Texas Intermediate crude fell $5.75, or six per cent, to $90.85 a barrel. Both benchmarks touched their lowest levels since May 7 earlier in the session.

The decline followed remarks by US President Donald Trump, who said on Saturday that Washington and Tehran had “largely negotiated” an understanding on a peace deal aimed at reopening the Strait of Hormuz — a critical route that previously handled around one-fifth of global oil and liquefied natural gas shipments before the conflict.

Despite the optimism, major disagreements remain between the two sides, particularly over blockades linked to the strategic waterway.

On Sunday, Trump said he had instructed US negotiators not to rush into any agreement with Iran, signalling that talks were still fragile.

Analysts said markets were cautiously welcoming the possibility of easing tensions in the Middle East, although uncertainty continued to weigh on investor sentiment.

“Markets have been at this stage before, only for talks to collapse,” ING head of commodities strategy Warren Patterson said, warning traders against overreacting.

MST Marquee analyst Saul Kavonic said there was now “some light at the end of the tunnel”, which could provide short-term relief to oil markets if progress continued.

However, analysts noted that even if a deal is reached, restoring normal oil flows through the Strait of Hormuz and repairing damaged energy infrastructure could take several months.

Meanwhile, US energy firms increased oil and natural gas rigs for the fifth straight week, according to Baker Hughes data.

The total rig count rose by seven to 558 in the week ending May 22, the highest level since June 2025, though it remained one per cent lower than the same period last year.

Phillip Nova analyst Priyanka Sachdeva said markets appeared to be stabilising after last week’s sharp selloff, but warned that confidence remained weak amid uncertainty surrounding the negotiations.