Oil prices tumble nearly 6% on renewed hopes for US-Iran deal

Global oil prices fell sharply in early Asian trading on Monday, with benchmark crude surrendering much of last week's war-driven gains as investors shifted focus from geopolitical fears to signs that military escalation between the United States and Iran may be easing.

A market snapshot at 7:32 am Monday (Julyl 27) in Tokyo showed:

The declines follow a week of extreme volatility in energy markets, during which oil prices briefly surged toward multi-month highs amid fears that fighting involving Iran, the US and Houthi militants could disrupt crude exports through the Strait of Hormuz and the Red Sea.

Investor sentiment improved after Washington signaled it was holding back additional military action to allow room for diplomacy, reducing immediate concerns of a broader regional conflict.

Traders are also reassessing whether supply disruptions will be as severe as previously feared.

Despite Monday's sharp sell-off, analysts caution that the energy market remains highly sensitive to developments in the Middle East.

Attacks on Saudi energy infrastructure and continued security threats in the Bab al-Mandab shipping corridor have highlighted the vulnerability of global oil supply chains, even as crude exports continue to flow.

The retreat in oil prices comes ahead of a pivotal week for financial markets, with investors awaiting major central bank decisions, corporate earnings and further geopolitical developments.

Lower crude prices could help ease inflation concerns if sustained, although analysts warn that any renewed attacks on energy infrastructure or shipping routes could quickly reverse the decline.

The International Energy Agency has previously warned that while oil flows have recovered from earlier disruptions, the market remains vulnerable to renewed conflict in the Gulf, with geopolitical risk continuing to overshadow supply-and-demand fundamentals.