Key Points
- Brent and WTI crude declined about 2%
- Geopolitical risk premium remains largely intact
- OPEC+ meeting now in market focus
ISLAMABAD: Oil prices slipped around 2 per cent on Sunday after US President Donald Trump announced he was suspending planned military strikes against Iran, easing immediate fears of further escalation in the Middle East.
However, traders continued to price in significant geopolitical risks amid uncertainty over regional security.
Brent crude, the international benchmark, traded around $87.8-$88.0 per barrel, down about 1.5 per cent to 2.0 per cent from levels above $89 before Trump’s announcement.
US West Texas Intermediate (WTI) crude fell by approximately 1.7 per cent to 2.3 per cent to $84.2-$84.5 per barrel.
The market reacted after Trump said he would halt planned attacks on Iran to allow more time for diplomacy, reducing the immediate risk of disruptions to energy supplies passing through the Strait of Hormuz.
The announcement prompted traders to unwind part of the geopolitical premium that had been built into crude prices during recent weeks.
Oil still elevated
Despite the decline, analysts said oil continues to trade at elevated levels because no formal agreement has been reached and tensions between Washington and Tehran remain unresolved.
Shipping risks in the Strait of Hormuz and uncertainty over future military developments have kept much of the conflict-related premium embedded in prices.
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The latest retreat has erased only a small portion of the sharp gains recorded during the recent escalation, leaving Brent more than 20 per cent above levels seen before the latest phase of the US-Iran confrontation.
Investors are also closely watching the OPEC+ ministerial meeting on Sunday (later today), where the producer group is expected to approve another increase in oil production for September.
While additional supply could help moderate prices, analysts said geopolitical developments in the Middle East are likely to remain the dominant driver of the global oil market in the near term.
