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Oil prices dropped sharply on Monday, sinking to their lowest levels in more than a week after the United States abruptly halted a campaign of air strikes against Iran over the weekend. The move revived hopes of a diplomatic breakthrough that could restore shipping flows through the Strait of Hormuz.

Brent crude tumbled $8.42, or 8.7%, to settle at $88.36 a barrel, its weakest close since July 17. US WTI followed suit, dropping $6.70, or 7.5%, to end the session at $82.61, the lowest level since July 16.

The reversal marks a sharp turnaround from last week, when Brent futures pushed past $100 a barrel as the conflict choked oil shipments through Hormuz and spilled into the Red Sea. That spillover hit exports from Saudi Arabia, the world's top oil exporter, disrupting flows through the Bab el-Mandeb strait toward Asia.

President Donald Trump struck a cautiously optimistic tone on Monday, describing "good talks" with Iran and saying "there's a good chance that something could happen" on a potential deal. He tempered the message with a warning that the US would pursue "strong military action" should diplomacy collapse.

Analysts expect volatility to persist as markets digest each twist in the fragile ceasefire, cautioning that physical oil flows remain far from normal despite the truce. "Shipping volumes remain heavily depressed after a brief mid-June ceasefire, limiting Middle East exports and forcing longer, costlier reroutes via Suez for Saudi Red Sea cargoes," analysts said.

Written by: Farid Muzaffar