Oil prices drop as tensions ease between Iran and Israel

Brent crude oil futures fell 0.8% to $86.60 per barrel. WTI crude oil futures fell 0.7% to $82.50 per barrel.

"Brent crude prices failed to retain their initial surge, with broad expectations that geopolitical tensions between Israel and Iran may fizzle off given Iran's tamed response," said Yeap Jun Rong, market strategist at IG. "With that, markets continue to unwind the geopolitical risk premium tied to potential supply disruptions, which seems more unlikely at current point in time," he added.

Both benchmark contracts jumped more than $3 a barrel in the early morning hours of April 19 after explosions in the Iranian city of Isfahan were reported in what sources called an Israeli attack, although gains were limited after Tehran said it had no plans to retaliate.

Yeap also told Reuters that the higher-than-expected increase in US crude oil inventories also didn't help matters, as the short-term price movements seem to be more of a supply than demand issue.

US crude oil inventories rose by 2.7 million barrels, according to data from the Energy Information Administration last week, almost double analysts' expectations of a 1.4 million barrel increase.

"Economic concerns again become a bearish factor of the crude market," with prices "under pressure due to a large build in the US stockpile and a hawkish Fed that led to a strong dollar," said independent market analyst Tina Teng.

Chicago Federal Reserve President Austan Goolsbee became the latest central bank chairman to announce a longer timeline for interest rate cuts as progress on inflation has "stalled."

On Saturday, the US House of Representatives passed an aid package for Ukraine and Israel that includes measures that would allow the federal government to expand sanctions against Iran and its oil production.

But markets ignored the news, as the impact of the measures, if adopted, will depend on how they are interpreted and implemented. Consideration of the bill in the Senate is scheduled to begin on Tuesday.

ANZ analysts said that volatility in the Middle East will keep oil markets on edge.

The impact of oil prices on Ukraine

Since the beginning of the war, Ukraine has been importing almost all of its fuel. The main factor affecting the price of fuel in Ukraine is global oil prices. In 2023, prices fell by 10% to $77.5 per barrel of Brent, which led to lower prices for gasoline and diesel.

Since the beginning of the year, oil prices have been rising, which has led to higher prices for gasoline and diesel in Ukraine.