GLOBAL oil prices fell sharply on Monday as a second consecutive night without United States airstrikes on Iran eased concerns over potential supply disruptions in the Middle East, prompting investors to unwind some of the geopolitical risk premium built into crude prices over recent weeks.
Crude oil dropped by as much as seven per cent, briefly approaching US$83 per barrel before recovering some of its losses as traders continued to monitor developments across the region.
The decline followed Washington's decision to suspend its military campaign against Iran late on Friday without an official announcement. Tehran subsequently said it had halted its retaliatory military operations and held discussions with Oman regarding the Strait of Hormuz, one of the world's most strategically important oil shipping lanes.
However, tensions in the region remain elevated despite the temporary lull.
Iran-backed Houthi forces in Yemen claimed responsibility over the weekend for attacks on facilities associated with Saudi Aramco at the Red Sea ports of Jizan and Yanbu, highlighting the continued risks facing regional energy infrastructure.
Crude prices have surged almost 40 per cent this month as the conflict expanded beyond the Strait of Hormuz to include the Red Sea, an increasingly vital alternative export route for Saudi Arabian crude that carries millions of barrels of oil each day.
The easing in geopolitical tensions also weighed on the US dollar.
The US Dollar Index slipped to around 101.2 on Monday, surrendering part of last week's gains as lower oil prices eased concerns that higher energy costs could fuel inflationary pressures.
Investor attention has now shifted to the US Federal Reserve's policy meeting later this week.
While the central bank is widely expected to keep interest rates unchanged, some market participants believe policymakers could still signal an earlier policy response should inflationary pressures re-emerge.
Markets are also awaiting several key US economic releases, including advance second-quarter gross domestic product (GDP) figures and the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation.
In addition, earnings reports from several major US corporations due this week are expected to provide further clues about the strength of the American economy and the likely direction of monetary policy in the months ahead. - July 27, 2026
