Oil prices slid sharply on Monday as traders responded to growing optimism about a potential breakthrough to end the Iran war.
Brent crude, the international benchmark, dropped by more than 6.5% to as low as $105.55 a barrel, marking its lowest settlement since Oct. 16. The rapid decline reflected a shift in investor sentiment away from a heightened risk premium tied to geopolitical disruption in the Middle East.
Market reaction was swift. Airline shares rose on expectations of lower fuel costs, while government borrowing costs eased as the fall in crude eased inflationary pressures and tightened risk perceptions in financial markets. Commodity and equity markets broadly reflected the change in outlook.
Analysts said the move underlined how sensitive oil prices remain to geopolitical developments, particularly in regions that are key to global crude flows. While the fall in prices relieved some immediate supply concerns, traders will continue to watch diplomatic and on-the-ground developments closely for signs the improvement is durable.
Any sustained retreat in oil prices could have broader economic implications by easing petrol prices and headline inflation, but market watchers warned that prices remain well above pre-crisis levels and still vulnerable to renewed flare-ups of conflict or other supply shocks.