Oil prices fell sharply on Monday after US President Donald Trump declared an "energy ceasefire" between Russia and Ukraine, a move that caught Kyiv off guard and left Moscow silent. Both main crude contracts dropped more than 1%, reversing an earlier spike triggered by weekend attacks on Saudi Arabia.
Trump announced the ceasefire on Truth Social early Sunday, writing: "Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Both parties have agreed. Do not break it!" The declaration followed his call for Ukrainian President Volodymyr Zelensky to halt strikes on Russian refineries and his suggestion that Ukraine needed a new president to end the war. Zelensky responded with surprise, saying he was seeking details but that Ukraine supported the ceasefire and urged Russia to do the same. Moscow has not confirmed any agreement.
The announcement drew a mixed reception. While some allies welcomed the move, Trump faced criticism after temporarily easing US sanctions on Russian diesel, a decision European leaders and Kyiv warned would only encourage Vladimir Putin. The energy ceasefire announcement left Kyiv puzzled as Russian strikes continued on Ukrainian power plants.
Market reaction and geopolitical context
The drop in oil prices provided support to most Asian markets, with Hong Kong, Sydney, Singapore, Wellington and Manila all gaining. However, Seoul and Taipei were dragged down by losses in chipmakers SK hynix, Samsung and TSMC. Tokyo was closed for a holiday. US futures were sharply higher.
Investors are also awaiting key US inflation and retail sales data, which could influence the Federal Reserve's interest rate decision at its meeting at the end of October. Earnings season begins this week with reports from JP Morgan, Goldman Sachs and Bank of America, followed by tech giants later in the month and November.
The oil price decline reversed an initial spike after Houthi attacks on Saudi Arabia over the weekend. At least a dozen people were killed at Riyadh's international airport on Saturday – the deadliest attack on Saudi soil in over a decade – and another died in a second strike on Sunday. The Iran-backed group claimed multiple attacks and threatened to continue targeting the kingdom's transit hubs.
"The market is no longer paying full geopolitical premium on every headline, and that is probably the most useful signal in the morning price action," wrote Stephen Innes of SPI Asset Management. "A strike matters if it threatens real barrels, shipping lanes, refining capacity or insurance costs; otherwise, the market is getting increasingly reluctant to pay up simply because the geopolitical ticker flashes red."
Innes added that the physical market remains tight enough to keep Brent above $100, but futures are refusing to treat every new escalation as the start of another inflation shock.
The ceasefire declaration also sparked debate over Ukraine's leadership. Trump's call for a new president in Kyiv was firmly rejected by Zelensky, who insisted that Ukraine's leader is for Ukrainians to choose. Meanwhile, Trump's decision to allow Russian diesel imports into the US in a bid to lower prices drew sharp criticism from Kyiv and European capitals, who see it as a concession to the Kremlin.
As winter approaches, diplomatic efforts continue. Talks in Miami aim for a partial ceasefire, but Ukraine is bracing for further Russian attacks on its energy infrastructure. The coming weeks will test whether the energy ceasefire holds and whether it can pave the way for a broader de-escalation.
