Oil prices dropped sharply on Monday as fears of a major disruption in the Middle East began to fade.
Brent crude futures fell $5.53, or 7.2%, closing at $71.48 per barrel.
Meanwhile, U.S. West Texas Intermediate (WTI) also dropped by 7.2%, settling at $68.51.
The sharp decline came after Iran chose to retaliate against U.S. airstrikes with a missile attack on the Al Udeid U.S. airbase in Qatar instead of targeting the vital Strait of Hormuz.
This waterway, located off Iran’s southern coast, is crucial for global oil trade, with about 20% of the world’s oil passing through it.
Market Reassured as Oil Flow Remains Unaffected
Though oil markets initially spiked in early Asian trading—Brent rising nearly 6%—the retreat followed confirmation that oil flows remained uninterrupted.
U.S. officials reported no casualties or damage to energy infrastructure following Iran’s missile strike.
Iran, the third-largest oil producer in OPEC, had previously threatened to close the Strait of Hormuz.
Such a move could have significantly disrupted global supply and driven oil prices much higher.
Energy Aspects, a market research firm, suggested that Iran’s carefully calculated attack on a well-defended U.S. military base might be a strategic move to de-escalate tensions without provoking a wider conflict.
They noted that the absence of U.S. casualties could lead to a reduction in the geopolitical risk premium priced into oil.
Tankers Diverted as Precaution
Despite the lack of direct disruptions, shipping data revealed that at least two supertankers made U-turns near the Strait of Hormuz in the aftermath of the U.S. airstrikes.
Some vessels chose to pause or reroute as violence escalated in the region over the past week.
Still, a source familiar with QatarEnergy’s operations said there was no disruption to liquefied natural gas (LNG) exports or production.
Qatar remains one of the world’s largest LNG exporters, and its exports all pass through the Strait.
Oil Firms Evacuate Staff Amid Escalation
Oil majors including BP, TotalEnergies, and Eni reportedly evacuated staff from oilfields in Iraq following the weekend’s developments.
Iraq’s state-run Basra Oil Company confirmed the partial evacuation but said operations remained largely unaffected.
This preemptive action underscores industry concerns about the potential for regional instability to spiral into something more disruptive.
Trump Pushes for More U.S. Drilling
Reacting to the price swings, former U.S. President Donald Trump urged the Department of Energy to accelerate domestic oil production.
Posting on Truth Social, he declared, “drill, baby, drill,” signaling a push to counteract any foreign supply threats with increased output at home.
Analysts Debate Future Price Path
Andy Lipow, president of Lipow Oil Associates, cautioned that while Middle East tensions are not new, markets should remain alert.
“In one sense, we’ve seen this movie before,” he said.
“Despite constant threats, the Strait of Hormuz has never been closed, but the risk always looms.”
HSBC analysts noted that Brent crude could temporarily spike above $80 per barrel if fears of a strait closure resurface.
However, they expect prices to pull back once those threats diminish.