Oil prices dropped to their lowest level in nearly three weeks on Monday as markets reacted to growing optimism around a potential US-Iran peace deal and the prospect of the Strait of Hormuz eventually reopening to normal traffic.
Brent crude futures fell $4.71, or 4.55%, to $98.83 a barrel, while US West Texas Intermediate declined $4.57, or 4.73%, to $92.03 a barrel — both hitting their lowest since May 7.
The moves followed US President Donald Trump’s announcement on Saturday that Washington and Tehran had “largely negotiated” a memorandum of understanding that would reopen the Strait of Hormuz, the critical waterway through which one-fifth of global oil and LNG shipments once flowed. However, Trump walked back some of the optimism on Sunday, saying he had told his representatives “not to rush” into a deal, and key disputes remain, including the continuation of the naval blockade.
MST Marquee analyst Saul Kavonic said there is now “some light at the end of the tunnel, which will bring some near-term oil price relief.” Analysts cautioned, however, that even after a deal is finalised it would take months for oil flows to normalise and for damaged facilities to be repaired.
For Sri Lanka, a sustained fall in Brent below $100 would ease pressure on the Ceylon Petroleum Corporation, which spent over $521 million on oil imports in recent months. The Central Bank is scheduled to announce its next monetary policy decision on 26 May, with the rupee’s recent performance closely watched alongside crude prices. The first tankers exited the Hormuz Strait last week for the first time since the conflict began.
