Oil prices fell sharply Monday after a missile strike by Iran on a U.S. airbase in Qatar left no reported casualties, raising investors' hopes that there might be a path to de-escalate the conflict in the Middle East.
U.S. crude oil fell $5.33, or 7.22%, to close at $68.51 per barrel, while global benchmark Brent shed $5.53, or 7.18%, to settle at $71.48. Prices are now at the lowest levels since Israel started bombing Iran on June 13.
Iran launched a missile strike on the Al-Udeid Air Base in Qatar in retaliation for U.S. strikes on its most important nuclear sites over the weekend, according to a NBC News translation of Iranian state TV.
Qatar confirmed that the Iranian strike did not cause any casualties, according to a spokesperson for the Gulf kingdom's foreign ministry. Qatar's air defenses intercepted the Iranian missiles, the spokesperson said.
Crude prices had jumped Sunday evening after the U.S. joined Israel's campaign against Iran. Brent rose more than 5% to crack $81 before easing. WTI reached its highest levels since January before pulling back.
The oil market sell-off shows that investors believe the conflict will de-escalate after President Donald Trump hit Iran over the weekend, Energy Secretary Chris Wright told CNBC in an interview on Monday.
There is a corner of the market that believes Trump has successfully escalated to de-escalate, Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC.
"Essentially, the peace through strength strategy," Croft said. "If we get nothing more from Iran, President Trump will take a big win on this."
Trump thanked Iran in a social media post "for giving us early notice" about the strike, "which made it possible for no lives to be lost." The president called on the Islamic Republic to move toward peace and said he would encourage Israel to do the same.
Strait of Hormuz fears
The oil market appears to have avoided its worst-case scenario for now in which Iran attempts to close the Strait of Hormuz. Some 20 million barrels per day of crude, or 20% of global consumption, flowed through the strait in 2024, according to the Energy Information Administration.
Iranian state media reported Sunday that Iran's parliament had backed closing of the strait, citing a senior lawmaker. However, the final decision to close the strait lies with Iran's national security council, according to the report.
U.S. Secretary of State Marco Rubio has warned Iran against attempting to close the strait. It would be "economic suicide" for the Islamic Republic because their exports pass through the waterway, Rubio said.
"We retain options to deal with that," Rubio told Fox News in an interview Sunday. "It would hurt other countries' economies a lot worse than ours. It would be, I think, a massive escalation that would merit a response, not just by us, but from others."
Iran produced 3.3 million barrels per day, or bpd, in May, according to OPEC's monthly oil market report released in June, which cites independent analyst sources. It exported 1.84 million bpd last month, with the vast majority sold to China, according to data from Kpler.
Rubio called on China to use its influence to prevent Tehran from closing the strait. About half of China's waterborne crude oil imports come from the Persian Gulf, per Kpler.
"I encourage the Chinese government in Beijing to call them about that because they heavily depend on the Straits of Hormuz for their oil," Rubio said.
