The decision by the U.S. and Iran to halt attacks in the Strait of Hormuz caused a sharp drop in oil prices on Monday. The cessation of the two-week-long tensions strengthened expectations of a diplomatic resolution and raised hopes for a return to normal ship traffic through the critical waterway.
Brent crude fell over 6% to $90.88 a barrel. U.S. West Texas Intermediate crude also dropped more than 6% to trade at $83.84.
Both crude benchmarks had been on an upward trend for the past three weeks. Brent had climbed to the $100 level after the fighting spread to the Red Sea and disrupted Saudi Arabia's exports to Asia.
U.S. Ambassador to the United Nations Mike Waltz announced that President Donald Trump had decided to temporarily halt attacks to allow more time for diplomacy.
IG Markets market analyst Tony Sycamore said, "Hopes are growing that a genuine diplomatic path is taking shape. Returning to the 14-point memorandum of understanding that would provide more clarity on control of the Strait of Hormuz would be a good starting point."
Despite the halt of attacks, according to data from Kepler, fewer than 10 ships carrying crude oil passed through the Strait of Hormuz daily at the beginning of the week.