New York/London —
Sound familiar? A pause in fighting between the United States and Iran has given oil traders hope that a diplomatic resolution could restart the flow of oil traffic out of the Middle East.
Oil prices tumbled 8% Monday, on pace for crude’s biggest single-day decline since May 25.
The “news” that oil markets are trading on is thin at best: The Trump administration paused plans to escalate the war. And a lack of fighting this weekend suggested that maybe the two countries could return to the negotiating table.
This war has widened and has no easy solution. The United States lacks a clear exit strategy. Iran remains incentivized to exercise maximum control over shipping traffic entering and exiting the oil-rich region. Traffic through the Strait of Hormuz remains effectively halted, and significantly lower through the Bab-al-Mandeb strait – with oil tankers unwilling to risk taking on fire from the Iranians and Houthis.
