By: Economy Middle east

Global oil prices fell over 5 percent to two-week lows on Monday as growing optimism surrounding potential diplomatic progress between the United States and Iran countered supply anxieties. Despite ongoing disagreements over critical issues, including transit blockades, market participants reacted to signs of moving closer to a structural resolution. 

Brent crude futures dropped $5.26, or 5.28 percent, to settle at $94.92 a barrel by 8:30 UAE time, while U.S. West Texas Intermediate crude fell $5.54, or 5.73 percent, to reach $91.07 a barrel. Both baseline contracts touched their lowest trading levels since May 7 earlier in the session.

Diplomatic complexity and infrastructure rehabilitation

The price correction followed statements from U.S. President Donald Trump indicating that Washington and Iran had “largely negotiated” an understanding on a peace framework designed to reopen the Strait of Hormuz. Prior to the regional conflict, the maritime chokepoint carried approximately one-fifth of global oil and liquefied natural gas shipments.

However, systemic friction remains, with President Trump subsequently noting he instructed negotiators not to rush the final proceedings. Market analysts emphasized that even if a formal agreement is finalized, returning to normalized oil flows through the waterway will require months due to necessary repairs on damaged oil and gas facilities.

Domestic supply adjustments and rig activity

In the United States, energy firms continued to scale up localization efforts in response to elevated domestic energy prices. U.S. operators expanded production capacity by adding oil and natural gas rigs for the fifth consecutive week, marking the longest continuous stretch of weekly gains since February 2025.

According to data from Baker Hughes, the weekly rig count—a primary forward-looking indicator for future domestic output—rose by seven to a total of 558 rigs in the week to May 22, reaching its highest level since June 2025. Despite this sequential expansion, the aggregate count remains down by eight rigs, or 1 percent, compared to the corresponding period last year.