By: AGBI

Oil prices dropped on Monday despite a Houthi attack on Saudi oil installations after the US and Iran paused fighting in the Arabian Gulf over the weekend, raising hopes the countries will return to the negotiating table.

Brent crude futures dropped 4 percent to $92.73 a barrel, while West Texas Intermediate crude also lost 4 percent to trade at $85.24.

Washington had, until Friday, directed strikes at Iranian military sites for 13 consecutive nights, which prompted Tehran to launch counter-attacks on countries including Kuwait, Bahrain and Jordan.

Crude prices rose above $100 a barrel and hit a high of around $102 last week after Iran-backed Houthi rebels targeted tankers aiming to cross the Bab al-Mandab strait in the Red Sea and prompted several ships to turn around.

The Houthis said in a video that they had hit sites belonging to Saudi ⁠state oil company Aramco in the cities of Jizan and Yanbu on Saturday. Saudi Arabia has not confirmed or denied the strikes.

The Red Sea route had become critical for oil exports from Saudi Arabia, which had been disrupted by virtual closures and attacks in the Strait of Hormuz since the war began in late February.

Shipping data showed that traffic fell on Sunday after the Houthi attack. Transit continued at a trickle over the weekend, according to Kpler, an analytics company.

Around a fifth of global oil supplies, or 20 million barrels a day, would pass through the Strait of Hormuz before the conflict.

No further negotiations have yet been arranged between the US and Iran.

But the US ambassador to the United Nations, Mike Waltz, on Sunday told Fox News that President Donald Trump had paused strikes to make room for diplomatic talks.

The US leader had previously threatened to unleash a “massive” attack.

Reports in the New York Times suggest one reason he pulled back was that an escalation in fighting could drain US weapons stockpiles – though Waltz rejected this.

Iran and Oman reportedly held talks on Friday and Saturday about the Strait of Hormuz, though they have not reached any formal agreement.