Global crude oil prices fell sharply on Monday, July 27, 2026, after the United States and Iran suspended military attacks over the weekend, creating an opportunity for peace negotiations.
Brent crude, the global benchmark for oil prices, dropped by more than 9 percent to US$87.59 per barrel, marking a sharp reversal from the previous week when prices surged above US$100 per barrel for the first time since May.
According to the BBC, the decline followed a statement by the U.S. Ambassador to the United Nations, who said that attacks on Iran had been suspended for two consecutive nights to provide “space for negotiations.” An Iranian military spokesperson later confirmed that Tehran had also halted its retaliatory attacks in the region.
Three anonymous sources told Reuters that the U.S. decision to suspend its bombing campaign was also influenced by warnings from military advisers that the armed forces were running out of viable targets and were becoming concerned about dwindling U.S. weapons stockpiles.
Pause in Hostilities Brings Temporary Relief
The pause in military operations has provided temporary relief for global energy markets, which had been under intense pressure for weeks.
Previously, Brent crude climbed above US$100 per barrel on July 23, reaching its highest level since the conflict began.
The surge was fueled by renewed tensions between the United States and Iran after the first ceasefire agreement, signed by both sides on June 17, collapsed ahead of schedule. Additional attacks by Houthi forces in Yemen targeting tankers in the Red Sea also threatened Saudi Arabia’s export routes, which are used to bypass the Strait of Hormuz.
The U.S.-Iran conflict, which began on February 28, caused the Strait of Hormuz—a critical shipping lane that normally handles around 20 percent of the world’s oil and liquefied natural gas supplies—to close to most vessels.
When the initial ceasefire agreement was signed in June and the strait reopened, oil prices briefly returned to pre-war levels of around US$70 per barrel.
However, the collapse of the ceasefire in early July quickly pushed prices higher once again.
Despite the current pause in hostilities, shipping tracker Kpler reported that fewer than 10 commodity carriers passed through the Strait of Hormuz each day over the weekend, well below normal pre-war traffic levels.
Market analysts remain cautious about the recent price decline.
Susannah Streeter, Head of Investment Strategy at Wealth Club, said markets remain “cautious given the many unexpected twists in this conflict.”
Although prices have fallen significantly, she noted that “there remains substantial uncertainty embedded in these prices and skepticism over whether negotiations will produce a lasting breakthrough.”
Saul Kavonic, an analyst at MST Marquee, added that shipping traffic through the Strait of Hormuz is likely to recover only gradually, as many shipping companies are still waiting for greater security assurances before deploying more vessels.
Impact on Gas Prices and Global Inflation Persists
The effects of the conflict extend beyond fuel prices.
Natural gas prices have also risen, with Wood Mackenzie reporting last week that Europe’s gas reserves have fallen to their lowest level on record.
If the Strait of Hormuz remains closed for another two months, Europe’s gas storage is projected to reach only 70 percent by November 1, significantly below the five-year average of 90 percent for the same date.
“Low European inventories, strong Asian demand, and limited growth in new LNG supply are almost certain to keep prices elevated throughout this winter and into 2027,” said Massimo Di Odoardo, Vice President of Gas and LNG Research at Wood Mackenzie.
The increase in oil prices during the conflict has already driven up gasoline and diesel prices in many countries, including Indonesia.
Higher fuel prices typically trigger a chain reaction by increasing the cost of other goods, including food, as businesses pass on higher operating costs to consumers, ultimately contributing to inflation.
The European Central Bank raised interest rates in June, citing the conflict as a source of inflationary pressure, while the Bank of England is expected to keep its benchmark interest rate unchanged at 3.75 percent during this week’s policy meeting, after previously having no plans for further rate hikes before the war.***
