Oil prices extend decline as US and Iran pause attacks

Oil prices extended declines on Tuesday, down by over $1 per barrel amid hopes for a resolution in the U.S.-Iran war. Brent crude futures were down $1.47, or 1.66%, at $86.89 by 0326 GMT, their lowest since July 20. U.S. West Texas Intermediate crude was at $81.16 a barrel, down $1.45, or 1.76%, also the lowest level since July 20. Both contracts slid around 8% in the prior session after the U.S. suspended a campaign of air strikes against Iran over the weekend.

U.S. President Donald Trump said on Monday the United States was having "good talks" with Iran and that there was a chance of a resolution. He also said U.S. strikes would resume if negotiations failed. IG analyst Tony Sycamore noted that "For now, the relief that an off-ramp has been found has taken the heat out of prices and eased concerns around Houthi attacks on Saudi infrastructure. However, the situation remains highly fluid." Afrah al-Zouba, the foreign minister-designate of Yemen's internationally recognised Saudi-backed government, said Yemen-based Houthi fighters aimed to replicate Iran's control of shipping through the Strait of Hormuz at Bab el-Mandeb. Marex analyst Edward Meir stated that traffic has dropped off significantly in the Red Sea and the Strait of Hormuz. He also said a key reason prices are not even higher is demand destruction, especially in Asia.