Oil price dives as US and Iran pause attacks

What the report says

BBC World News reported that oil prices fell sharply on Monday after the United States and Iran paused attacks, raising market hopes that diplomacy could reduce the risk to global energy supplies. Brent crude, the international oil benchmark, dropped more than 9% and slipped below $88 a barrel, reversing part of last week’s surge above $100.

According to the BBC, the US ambassador to the UN said strikes on Iran had been stopped for a second consecutive night to give “talks some space.” An Iranian army spokesperson said on Sunday that Tehran had also suspended what it described as retaliatory attacks in the region. The pause followed renewed fighting after an earlier ceasefire collapsed this month.

The BBC said the conflict had previously driven prices higher because it effectively shut the Strait of Hormuz, a critical route for oil and liquefied natural gas shipments. The report said Iran and the US had signed a memorandum of understanding in June to stop military operations and reopen the strait, helping oil return to about $70 a barrel before the latest escalation. Additional pressure came last week from Houthi attacks on oil tankers in the Red Sea, another important export route.

Susannah Streeter of Wealth Club told the BBC that investors remained cautious because of repeated shifts in the conflict. The story matters because higher crude prices can feed into petrol, diesel, food and transport costs, adding pressure to inflation in many countries.