Oil prices fall amid pause in US strikes on Iran to give 'space' for diplomacy

Tehran, in turn, said it would stop its retaliatory attacks on regional neighbours, handing Gulf shipping and the oil industry a respite.

"Since ... our strategy has essentially been retaliatory, we have also halted our retaliatory operations," said Iran's army spokesman Mohammad Akraminia.

The two resumed hostilities this month, breaking a fragile truce, after Iran attacked ships passing through Omani waters in the Strait of Hormuz, sparking a pattern of escalation.

Prior to Friday, the US military had carried out strikes on Iran for 13 consecutive nights, in the largest rekindling of the almost five-month-old war since an April ceasefire. But Friday, Saturday and Sunday nights passed without bombing.

That derailed diplomatic efforts between Washington and Tehran, but the conflict then expanded beyond the vital energy corridor and saw Iran-backed Houthi rebels in Yemen strike Saudi vessels in the Bab al-Mandeb Strait, a crucial passage into the Red Sea.

Crude prices soared on the flare-up, with Brent breaking back above $100 a barrel last week for the first time since May. News that shipping continued in the Red Sea helped investors pare the gains Friday.

However, Trump's decision to hold off more strikes and Iran's claims Sunday that it had made progress in talks with Oman on management of the Strait of Hormuz provided some much-needed relief.

The discussions focused on "common principles and operational mechanisms" for ensuring the safe passage of shipping through the strait while respecting the sovereign rights of the two states, according to Iran's foreign ministry spokesman Esmaeil Baqaei.

Meanwhile, a report said Pakistan was looking at resuming US-Iran peace talks following a push initiated by China.

Both main oil contracts sank Monday, with Brent shedding more than seven percent at one point to briefly drop back below $90.

"It looks as if developments in the Middle East have moved in a positive direction over the weekend, adding some credibility to the notion that oil above $100 a barrel seems to induce de-escalatory behaviour from both sides," wrote National Australia Bank's Sally Auld.

The positive developments eased worries about a reignition of inflation and a fresh round of interest rate hikes, in turn helping most equity markets higher.

However, concerns about the sustainability of the AI boom and questions over the eye-watering sums pumped into the sector continue to dog traders, as tech firms bear the brunt of selling.

Seoul again led the losses, shedding more than one percent with chip giants SK hynix and Samsung in the firing line once more. Taipei and Singapore fell, with Jakarta also in retreat following the surprise resignation of Indonesian central bank boss Perry Warjiyo citing personal reasons.

Tokyo rose, though tech firms Advantest, Kioxia and Tokyo Electron suffered more hefty selling pressure. Hong Kong, Sydney, Shanghai, Wellington and Manila were also up.

(FRANCE 24 with AFP)