Oil prices fell in Asian trading on Monday after Brent crude reached a six-month high last week, as investors assessed the risk of further escalation in the Middle East and signs that shipments from the region had recovered towards prewar levels.
Brent crude futures declined 1.31% to $115.19 a barrel, while US West Texas Intermediate futures fell 1.5% to $101.83. Prices retreated as a technical indicator pointed to overbought conditions and the US and Iran maintained their existing positions in the conflict.
The pullback comes after Brent surged about 90% this year as the war disrupted energy supplies and widened to involve Yemen’s Houthi rebels. The risk of further attacks on energy infrastructure and shipping routes remains a concern for markets, even as crude shipments through the Strait of Hormuz have recovered to near prewar levels.
Trump Signals Decision Point on Iran Deal
US President Donald Trump told Fox News that it was “getting to be decision time” on whether he would reach a deal with Tehran or “finish it off”.
Iranian Foreign Minister Abbas Araghchi, meanwhile, said the US and Israel would not attempt an attack if rationality prevailed, referring to the possibility of further military action.
Brent crude rose to its highest level since April on Friday after news reports suggested that the US and Israel could be preparing to strike Iran after the US midterm elections in early November.
The conflict has also raised concerns about the security of oil supplies from the Middle East. Over the weekend, fighting between Saudi Arabia and Iran-backed Houthi rebels in Yemen added to those risks.
The Houthis claimed they had targeted King Khalid International Airport in Riyadh in response to Saudi attacks on Sanaa and other areas of Yemen on Saturday.
Strait of Hormuz Remains Critical to Oil Supplies
Crude shipments from the Middle East have recovered to near prewar levels, including through the Strait of Hormuz, despite Iranian attacks on vessels.
The narrow waterway connects the Persian Gulf to global energy markets and has been a focal point of the conflict. Any renewed disruption to traffic through the strait could affect oil supplies and prices.
Brent’s sharp rise this year reflects the impact of the conflict on energy flows and the threat of further disruption. Monday’s decline suggests some easing in prices after last week’s rally, although geopolitical developments remain a key factor for the market.
Markets Brace for Key Political and Monetary Events
Investors are also watching a series of events that could influence financial markets in the coming days.
Israeli elections are scheduled for Tuesday, followed by the US midterm elections in early November. The Federal Reserve is also due to announce its monetary policy decision between those events.
Higher oil prices and a broader sell-off across sectors weighed on US stocks on Friday, pushing the three major US stock indexes lower.
The direction of oil prices will depend in part on whether tensions in the Middle East escalate further and whether energy shipments can continue to move through key routes without significant disruption.