Sonali TiwaryInternational oil prices dropped more than 5 percent on July 27–28 following announcements that the United States and Iran had paused attacks for a second consecutive day, reducing immediate geopolitical tensions that had pushed crude prices above $100 per barrel.
The benchmark Brent crude fell 8.7 percent, closing at $88.36 per barrel, while US crude West Texas Intermediate declined 7.5 percent to $82.61 per barrel. The magnitude of the decline reflected market relief as escalation risks diminished.
The military pause followed weeks of intensive strikes by both nations after the Trump administration declared a previous ceasefire agreement terminated on July 7. The original memorandum of understanding signed in June 2026 between Washington and Tehran had aimed to halt a war that began in late February when the United States and Israel launched operations to dismantle Iran’s nuclear program.
The deterioration of the June agreement came after Tehran attacked shipping in the Strait of Hormuz, prompting Trump to resume military operations. The subsequent 13 consecutive nights of attacks from both sides threatened global energy security as the strategic waterway through which much of the world’s oil passes came under direct threat.
The current pause was announced as aimed at providing “diplomacy some space” to resolve underlying disputes, according to US Ambassador to the United Nations Mike Waltz. The pivot toward renewed diplomatic efforts rather than continued military escalation reduced market fears about supply disruptions and infrastructure damage in the Middle East.
Oil markets are highly sensitive to Middle East geopolitical developments because the region contains global reserves critical to international energy supply. Disruptions to production or transportation through crucial shipping routes like the Strait of Hormuz directly impact global crude availability and prices. Beyond oil markets, the reduced military tension generated relief across global financial markets, with European and Asian stock markets rising following the news as investors reassessed economic outlooks freed from escalating geopolitical risk premiums.
