Oil Falls More Than 6% After Pause in Middle East Attacks as Markets Surge

The international price of oil began the week with a sharp drop after the U.S. decided to temporarily suspend attacks on Iran, a signal that eased immediate fears of a disruption in energy supply from the Middle East. In this context, global stock markets are rising strongly.

Brent, the benchmark for Argentina, fell 6.6% to $85.65 per barrel. Meanwhile, WTI, the U.S. benchmark, dropped 7% to $83.03 per barrel, also dragging down natural gas prices in Europe.

The price decline occurred after Washington paused bombings over Iranian territory over the weekend, a decision that renewed expectations of a possible de-escalation of the conflict.

Washington's decision to temporarily halt bombings reduced geopolitical tension and led to a significant drop in Brent and WTI prices. However, the market remains attentive to the Strait of Hormuz, Houthi attacks, and the future of negotiations.

In this scenario, major Asian and European stock markets are advancing strongly. In the East, the Nikkei index in Tokyo is up 0.5%; the Hang Seng in Hong Kong jumps 1%; and the Shanghai market rises 1.2%.

The pan-European Euro Stoxx 50 climbs 1.4%. Meanwhile, the Spanish index IBEX increases 1.5%; the German DAX, 1.6%; the English FTSE 100, 0.6%; and the French CAC, 0.9%.

The drop in crude oil prices is due to traders beginning to discount part of the geopolitical risk premium that had built up over the past weeks, during which Brent briefly surpassed $100 per barrel.

Nevertheless, the outlook remains fragile. Iran has temporarily suspended its reprisals, while the Donald Trump administration has decided to open a window for resuming diplomatic negotiations.

However, Houthi rebels in Yemen, backed by Tehran, claimed to have attacked facilities linked to Saudi Aramco in the Saudi ports of Jizan and Yanbu, although this version has not yet been officially confirmed by Saudi Arabia.

Additionally, the main Russian oil port on the Black Sea continues to operate under restrictions following a series of drone attacks from Ukraine, a factor that maintains concerns about the global energy supply.

Despite the sharp decline, Brent still accumulates an increase of over 25% in July, reflecting the impact of the conflict's expansion towards the Strait of Hormuz and the Red Sea, two key corridors for global oil transportation.

The main question for investors is whether the current pause in hostilities can transform into a longer-lasting ceasefire. "The pause in attacks and signs of progress in negotiations have increased expectations for a de-escalation pathway that could allow a recovery of flows through the Strait of Hormuz and the Red Sea," explained Saul Kavonic, senior energy analyst at MST Marquee, as quoted by Bloomberg.

However, the specialist warned that the main conflict hotspots remain unresolved. "Central issues, including Iranian control over the Strait of Hormuz and its nuclear and missile programs, remain unresolved, so there is a high risk that any ceasefire will be merely temporary," Kavonic stated.

The evolution of the oil price will be one of the factors that major central banks will monitor this week, especially the Federal Reserve of the United States (Fed), which will hold a new monetary policy meeting.

A potential stabilization of crude oil prices would help moderate global inflation expectations. However, as long as tensions persist in the Middle East and risks continue over major energy routes, the market will maintain high volatility in oil prices.