Oil prices experienced a significant decline on Sunday, with Brent crude, the international benchmark, falling approximately 5.7% to about $91.30 a barrel. US crude was also down around 5.4% to $84.43 a barrel. This drop followed a pause in military strikes by the United States against Iran, aimed at allowing room for diplomacy. However, gas prices in the US still ticked higher, reaching an average of $4.11 per gallon, an 11-cent increase from a week prior and 38% higher since the conflict began in late February, due to the impact of the Strait of Hormuz closure on oil trade.
The pause in US operations comes after 13 nights of escalating air strikes, with no US attacks reported on Saturday or Sunday. A senior Iranian source conveyed that Iran would halt its own attacks if the US maintained its pause, adhering to an "attack for attack" principle. Despite the immediate relief, the Iranian source expressed skepticism, viewing the pause as tactical rather than a genuine shift in the US negotiating position. US officials, including ambassador to the UN Mike Waltz, indicated that President Trump's decision was to give diplomacy a chance while also demonstrating the consequences if Iran fails to engage seriously.
Despite the lull in direct US-Iran conflict, the broader regional instability persisted. Iran's Houthi allies in Yemen attacked Saudi oil installations along the Red Sea coast, including targets in Jizan and Yanbu. A large column of smoke was observed near the Aramco refinery in Jizan, which can process up to 400,000 barrels of crude oil daily. This Houthi action highlighted concerns that the conflict could affect a second major shipping route and reignite the Yemeni civil war.
In financial markets, stock futures reacted positively to the de-escalation. Nasdaq futures gained 1.2%, Dow Jones futures gained 0.6%, and S&P 500 futures rose 0.7%. Conversely, Brent crude had previously risen above $100 for the first time since May following earlier Houthi attacks on Saudi Red Sea oil targets. The Iranian Oil Minister, Mohsen Paknejad, stated that Iran sold $11.5 billion worth of oil during the war and a further $6.5 billion during the ceasefire, benefiting from lower risks to tanker traffic.
The decision to pause strikes by the US was reportedly influenced by concerns from advisors, including Vice President JD Vance and Gen. Dan Caine, Chairman of the Joint Chiefs of Staff, regarding expanding the conflict, depleting defense stockpiles, alienating Middle East Gulf allies, and adverse effects on energy supplies and the global economy. A Department of Defense source confirmed that operations were "on a hold." The US military also noted that its naval blockade against Iran "remains in full effect" despite the pause in strikes.
