Oil prices fell Monday after President Donald Trump called off a planned military strike on Iran, easing fears of immediate supply disruptions. International benchmark Brent crude dropped 1.33% to trade at $110.61 per barrel, while US West Texas Intermediate futures fell 0.91% to $103.43 per barrel.
Trump said he was postponing the attack, originally scheduled for Tuesday, at the request of Gulf leaders amid what he described as "serious negotiations" with Tehran. The announcement came after Iran said it had responded to a new US proposal aimed at ending the war.
The reprieve in tensions comes as the International Energy Agency warns global oil inventories are depleting at a record pace. IEA head Fatih Birol told reporters at the G7 finance leaders meeting in Paris that the world only has a few weeks' worth of oil reserves left due to the ongoing closure of the Strait of Hormuz.
According to preliminary IEA data, global oil stockpiles fell by 129 million barrels in March and another 117 million barrels in April following US and Israeli strikes on Iran. Cumulative supply losses from Gulf producers have now exceeded one billion barrels, with more than 14 million barrels a day unable to leave the region.
The IEA said demand could begin to recover later this year if an agreement is reached to gradually restore flows through the Strait of Hormuz from the third quarter. But with peak summer demand approaching, the agency cautioned that "further price volatility appears likely."