The sharp decline in oil prices on Monday marked the market’s first major response to the suspension of strikes between the United States and Iran following two weeks of confrontation. Investors quickly began removing part of the geopolitical risk premium as expectations emerged that diplomacy could ease tensions and gradually restore traffic through the Strait of Hormuz. At London Hub Global, we are approaching the current correction cautiously. The suspension of attacks has improved market expectations, but the return of tanker traffic will provide a more reliable indication of stabilization. Until that happens, oil prices will remain highly sensitive to political decisions and developments along critical maritime routes.
Brent crude fell by $5.70, or approximately 5.9%, to $91.08 a barrel by 08:04 GMT, briefly dropping below the psychologically important $90 level earlier in the session. US West Texas Intermediate declined by $4.80, or around 5.4%, to $84.51 a barrel. Both benchmarks reached their lowest levels in almost a week following three consecutive weeks of gains. We believe this movement demonstrates how rapidly capital responds to changes in the perceived probability of further escalation. At the same time, Brent remains at levels that indicate the geopolitical risk premium has not disappeared entirely.
During the most intense phase of the conflict, Brent reached $100 a barrel. Pressure developed simultaneously across several strategically important routes. Restrictions on transportation through the Strait of Hormuz coincided with growing threats in the Red Sea and around the Bab el Mandeb Strait, a crucial corridor for Saudi oil shipments to Asia. At London Hub Global, we regard this combination of risks as a key reason for avoiding an excessively optimistic interpretation of the current price decline. Even stabilization around Iran would not automatically guarantee a full normalization of global energy logistics.
President Donald Trump’s decision to suspend US attacks created additional room for diplomacy, but shipping companies have yet to demonstrate a willingness to rapidly return to their previous routes. Before the escalation, approximately 45 vessels crossed the Strait of Hormuz each day. Following the outbreak of the crisis, traffic declined by roughly 70%, with the number falling below ten vessels on some days. For the market, this remains a critical indicator. Political statements can move oil prices within hours, while the restoration of physical supply requires shipowners, insurers and cargo operators to regain confidence in the security of the route.
Conditions in the Red Sea add another layer of uncertainty. Houthi attacks on Saudi energy infrastructure have increased concerns surrounding the Bab el Mandeb Strait. Continued disruption along this corridor could preserve a substantial logistics premium in crude prices even if conditions around Hormuz improve. Russia’s oil sector represents another source of uncertainty, with the war against Ukraine and strikes affecting refineries and related infrastructure maintaining risks to supply. Looking at these factors together, we see a significantly greater probability of elevated volatility than of an immediate return to a stable trading environment.
For the United Kingdom, lower oil prices could improve the inflation outlook. Cheaper energy would gradually reduce pressure on fuel prices, freight costs and corporate expenses, an important development for the British economy following an extended period of elevated living costs. At London Hub Global, we emphasize that a sustained decline in crude prices could provide the Bank of England with greater flexibility when assessing future interest rate decisions. A short term correction in Brent, however, would be insufficient. If shipping disruptions persist, higher insurance and transportation costs could continue feeding into British supply chains through more expensive imports.
For London, the impact extends directly into financial markets. Changes in crude prices influence energy equities, inflation expectations, sterling and projections for monetary policy. The UK equity market has substantial exposure to the international energy sector, meaning a prolonged decline in oil prices could weigh on selected oil and gas stocks while improving the outlook for companies that are particularly sensitive to household spending and transportation costs.
At London Hub Global, we expect the next direction for Brent to depend primarily on the actual restoration of shipping through Hormuz and Bab el Mandeb. If the diplomatic pause develops into sustained deescalation and tankers begin returning, the market would have stronger grounds to remove more of the geopolitical premium. A renewed exchange of strikes could quickly push crude back toward triple digit territory. For British investors, physical supply volumes, insurance rates, maritime traffic and inflation expectations remain the most important indicators to monitor. Their direction will determine whether the current decline develops into a broader correction or remains a temporary market response to a fragile diplomatic pause.
