Oil price falls1.9% to $96.49 as Hormuz tensions keep supply

Global oil prices fell on Monday, with Brent crude slipping below $97 a barrel, as expectations of a possible diplomatic agreement between the United States and Iran eased fears of further military escalation and disruption to crude supplies.

The decline offers some relief to oil-importing economies facing elevated energy costs, although continued security incidents around the Strait of Hormuz suggest that the risk of renewed price volatility remains significant.

Brent crude futures for January delivery fell by about 1.9 per cent to $96.49 a barrel, from the previous close of $98.32, while United States benchmark West Texas Intermediate (WTI) crude futures for December delivery declined by 1.2 per cent to $89.75, compared with $90.83 at the previous close.

The market reaction followed comments by US President Donald Trump that further American military strikes on Iran were highly unlikely if Tehran agreed to a strong deal covering its nuclear programme and access through the Strait of Hormuz, a critical passage for global oil shipments.

Speaking to CNN, Trump said the likelihood of renewed strikes would depend on whether Iran accepted an agreement, although he maintained that Washington remained prepared to resume military action if necessary.

He also claimed that earlier engagements had inflicted severe damage on Iran’s military capabilities, adding that American forces were positioned to launch further attacks if required.

However, the prospect of diplomatic progress has not removed the immediate threats to energy supply. Fresh US strikes on Iran and reported security incidents involving vessels around the Strait of Hormuz have continued to underline the fragility of the regional situation.

Overnight US strikes on Iran’s Qeshm Island reportedly caused no damage to residential or commercial areas or critical infrastructure, according to Ahmad Nafisi, deputy governor of the southern Hormozgan province.

Nafisi, cited by the semi-official Fars news agency on Monday, said the situation on the island, which lies close to the entrance of the Strait of Hormuz, remained under control, while emergency services and public utilities were on high alert.

He said the targeted locations were outside residential and commercial areas and that essential services and vital infrastructure had not been affected.

The latest security concerns followed a statement by Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy that two oil tankers caught fire after striking naval mines in or near the strait.

The IRGC accused the vessels of switching off their navigation and positioning systems and attempting to use an unauthorised route. It said one tanker was hit east of the strait and the other within the waterway.

In a separate incident, the US military’s Central Command (CENTCOM) said an American aircraft had disabled a cargo vessel in the Gulf of Oman after repeated attempts to breach the US naval blockade of Iran.

CENTCOM identified the vessel as the St Kitts-flagged Huda, which it said had previously visited an Iranian port.

The developments leave oil markets balancing hopes of a diplomatic breakthrough against the possibility of further disruption to shipping and energy supplies.

For major oil-importing economies, including Nigeria, a sustained decline in crude prices could moderate imported energy costs and ease pressure on domestic fuel prices. However, the benefit would depend on the direction of global refined-product prices, exchange-rate movements and domestic supply conditions.

The Strait of Hormuz remains central to the market outlook because any prolonged disruption to shipping through the corridor could quickly reverse the current price decline.

Monday’s retreat therefore reflects improved expectations about the possibility of de-escalation rather than a complete resolution of the supply risks confronting the global oil market.