Oil Prices Fall as US-Iran Peace Hopes Rise, Analysts Urge Caution

Oil prices fell sharply on Monday, reaching a two-week low amid growing optimism for a peace agreement between the United States and Iran. Brent crude dropped nearly $5 to $95.30 per barrel, while WTI crude fell $5.30 to $91.30 per barrel.

This optimism stems from U.S. President Donald Trump's statement that Washington and Tehran had "basically agreed" to a peace deal that could reopen the Strait of Hormuz. This vital waterway, through which approximately 20% of the world's oil and liquefied natural gas was transported before recent conflicts, is key to global energy markets.

Sol Kavonik, an analyst at MST Marquee, noted that "light at the end of the tunnel" is visible, suggesting a near-term reduction in oil prices. However, Reuters reports that significant disagreements persist between the two nations on crucial issues, including the blockade of the strait. Trump also indicated that his representatives should not rush any agreement with Iran.

Warren Patterson, head of commodities strategy at ING, urged caution, reminding that similar near-agreements have collapsed before. He expects the market to remain reserved. Furthermore, analysts believe that even if hostilities cease immediately, restoring oil and gas supply through the Strait of Hormuz to pre-conflict levels would require several months for repairs to damaged facilities.