Oil prices dropped more than 5% on Monday, July 27, 2026, following a weekend pause in strikes by the U.S. and Iran after two weeks of attacks. This pause has raised hopes for a diplomatic solution that could de-escalate tensions and allow shipping to resume in the Strait of Hormuz, a critical oil transit route.

Brent crude futures fell $5.70, or about 5.9%, to $91.08 a barrel by 0804 GMT, briefly dipping below the key $90 support level. West Texas Intermediate crude declined $4.80, or roughly 5.4%, to $84.51 a barrel. Both benchmarks are trading at their lowest levels in nearly a week after rising for three consecutive weeks.

The conflict had previously pushed Brent crude prices to $100 per barrel as attacks reduced oil shipments through the Strait of Hormuz and spilled over into the Red Sea. This spillover hindered exports from Saudi Arabia, the world's top oil exporter, through the Bab el-Mandeb strait to Asia.

Shipping data from Kpler showed fewer than 10 commodity vessels passed daily through the Strait of Hormuz over the weekend. MST Marquee analyst Saul Kavonic noted, "Any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring more empty ships into the Strait."

Ship traffic through the Bab el-Mandeb strait also declined on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker did exit via the strait.

UOB analysts warned that as the Middle East conflict expanded to the Red Sea and Ukrainian drones targeted Russian ships and refineries, sustained supply disruptions could keep oil prices elevated and continue to pose upside risks to global inflation.

PVM analyst John Evans commented, "The market seems to be forever seeking good news from an arena that really is not providing any."

While the pause in military strikes may appear positive, there are no guarantees that oil flow will soon normalize. Prices are expected to decline only if high prices reduce demand, rather than from temporary ceasefires.

Sources also reported that U.S. President Donald Trump decided to pause U.S. attacks to allow more time for diplomacy.

Sources