Oil markets reacted sharply Friday as the United States halted its bombing campaign around the Strait of Hormuz, citing the limits of the military operation. The U.S. has not conducted new attacks since last Friday, a pause that has allowed tensions to cool and sent energy prices tumbling across global markets.
Strikes have ceased as diplomacy gains traction.
U.S. Military Central Command (CENTCOM) commander Brad Cooper announced that almost two weeks of relentless strikes had significantly degraded Iran’s position around the key waterway. However, Cooper stated the campaign had hit a point of diminishing returns. According to reports, the U.S. is now seeking to give diplomatic channels space.
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U.S. Ambassador to the United Nations Mike Waltz echoed this sentiment, acknowledging the pause is intended to facilitate negotiations. Waltz described the President as a leader seeking peace who is now allowing diplomacy a chance to function without the pressure of immediate military escalation.
Progress appears to be underway in these talks. CBS News reported Sunday that Iranian officials and Omani mediators are discussing a return to a ceasefire. One Iranian source told the outlet that negotiations to reopen the Strait of Hormuz are moving in a positive direction, though the waterway remains a contentious point of contention between the two nations.
Concerns about the sustainability of the military response have also surfaced. Axios reported that General Dan Caine, chairman of the Joint Chiefs of Staff, warned that dwindling stockpiles of interceptors could prevent the U.S. from properly defending its positions and those of its allies. This logistical reality adds weight to the decision to halt offensive operations.
Washington and London are moving to address the security of the waterway through diplomatic channels. The two nations are set to convene a high-level meeting in London to discuss forming an international coalition. The goal is to guarantee safe passage through the Strait of Hormuz, building on previous discussions with France and other allies.
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While Washington pushes for a broad coalition, some potential participants have signaled reluctance. Reports indicate that several countries have indicated they will only join the security arrangement if active fighting in the waterway ceases completely.
Energy markets have adjusted rapidly to the shift in hostilities. Brent crude, the international benchmark, dropped 6.28% on Monday and settled at $85.92 per barrel. This marked a significant decline from late last week when prices topped $100. West Texas Intermediate, the U.S. benchmark, fell further to $83.32 per barrel during the same session.
The sudden drop in oil values reflects the immediate market response to the cessation of hostilities. Traders are pricing in a lower probability of supply disruptions, which had driven prices higher throughout the escalation period.
