Oil Prices Dip as Hormuz Strait Talks Progress, Lifting Asian Markets

Oil prices dropped sharply in early Asia trade on Monday, as Asian stock markets rose. Investors reacted to signs of movement towards an agreement that could end the US-Israel war with Iran. Traders also priced in a possible reopening of key Gulf shipping routes. The shift eased some pressure on economies that rely on imported energy.

Brent crude fell 5.5% to $97.90 (£72.64) a barrel, while US-traded crude slid 5.8% to $90.99. Japan’s Nikkei 225 gained 2.9% and moved above 65,000 for the first time. Sentiment improved on hopes that the Strait of Hormuz could reopen soon for shipping.

The Strait of Hormuz is a narrow route vital to global trade. It normally carries about one fifth of the world’s oil and liquefied natural gas. The channel has been effectively closed since the conflict began on 28 February. The disruption has hit major buyers across Asia, including Japan and South Korea.

Oil prices had swung sharply since early March, after Iran threatened to attack vessels using the strait. The warning followed US and Israeli attacks on Iranian targets. The added security risk tightened an already strained oil market. Traders also weighed higher shipping insurance costs, alongside possible supply interruptions across the region.

Donald Trump tied a possible agreement with Iran to restoring access through the Strait of Hormuz. Trump had said the deal would include returning traffic to the route. Trump did not give further public details on how shipping would restart safely. Even so, markets treated the signal as meaningful.

On Saturday, Trump posted that there had been a "very good call" with leaders of Saudi Arabia, the United Arab Emirates, Qatar, "and others" about a "Memorandum of Understanding pertaining to PEACE". Trump also wrote: "An agreement has been largely negotiated, subject to finalization between the United States of America, the Islamic Republic of Iran, and the various other Countries, as listed," and added that "Final aspects and details of the deal are currently being discussed, and will be announced shortly."

Oil prices watch ceasefire talks as officials flag remaining gaps

Trump said a separate discussion with Israeli Prime Minister Benjamin Netanyahu "went very well". Trump has argued any settlement would "absolutely" stop Iran from acquiring a nuclear weapon. On Truth Social on Sunday, Trump cautioned: "Both sides must take their time and get it right. There can be no mistakes!" Iranian foreign ministry spokesman Esmaeil Baqaei said positions moved closer, but cited "contradictory statements".

A ceasefire was agreed in early April, and talks have continued since then between Washington and Tehran. Brent still traded well above pre-war levels near $70 a barrel, despite the latest fall. Tehran has also struck Israel and US-aligned Gulf states, including Saudi Arabia, Bahrain and the United Arab Emirates. For finance readers, oil prices remain sensitive to any shift in Gulf shipping risk.

Asset	Move	Level
Brent crude	Down 5.5%	$97.90 (£72.64) per barrel
US-traded crude	Down 5.8%	$90.99 per barrel
Nikkei 225	Up 2.9%	Above 65,000