Oil prices slipped 5 percent on Monday morning after the US and Iran paused strikes over the weekend, with Brent crude falling to $91.89 after briefly dipping below $90, both contracts trading at their lowest levels in nearly a week after rising for three consecutive weeks. Markets were pricing in diplomacy. The pause is real. What it is not is a final agreement, and the distance between a weekend without strikes and a signed nuclear deal is the distance the next 19 days have to close.
The most significant development of the past 48 hours was not the pause. It was Iran’s new Supreme Leader speaking publicly for the first time since February 28. Mojtaba Khamenei stated that “preservation of Lebanon’s territorial integrity and the absolute, unconditional termination of the Zionist regime’s aggression are the primary conditions for any agreement to end the imposed war against the aggressive US.” That statement, Iran’s supreme leader’s first public position on the final deal conditions, places Israeli withdrawal from Lebanon as a precondition for Iran signing anything. Israel is not a party to the MOU. It is not under any binding obligation to withdraw on a timeline Iran can enforce through the Islamabad process. Mojtaba’s first public words on the war have just made Pakistan and Qatar’s bridging task structurally harder.
The US Ambassador to the UN said talks with Iran are “happening at every level,” while noting that Iran’s regime is internally divided with “fighting going on internally.” A US congressman visiting Pakistan said he sees enormous opportunity and confirmed that “President Trump, Field Marshal Asim Munir, and Prime Minister Shehbaz Sharif are working together,” adding there is “still scope for diplomacy” if Iran abandons nuclear weapons ambitions and keeps Hormuz open. That visit, a sitting US congressman traveling to Islamabad during the final deal window, is itself a signal about how seriously Washington views Pakistan’s continued mediation role.
The Numbers That Make the Pause Fragile
Fewer than 10 vessels per day passed through the Strait of Hormuz over the weekend despite the pause, with only three vessels transiting on Saturday with their transponders switched off. Eleven commodity vessels passed through Bab el-Mandeb on Sunday, the lowest level in months, as Houthi attacks on Saudi oil installations continued. Oil had reached $100 per barrel as both Hormuz and the Red Sea were simultaneously disrupted. The weekend pause helped to temporarily defuse the pressure. It did not reopen either of the waterways to normal traffic.
In July alone, 11 US drones were shot down by Iranian air defenses, per Iranian media, including MQ-9s over Bushehr, Ahvaz and Asaluyeh. Iran’s foreign minister said Ukraine hit an Iranian vessel at Israel’s behest and that the attack “cannot go unanswered.” The Pentagon quietly moved four US troops killed in renewed fighting from its official war death toll into a new separate category called “Overseas Operations,” a reclassification the AP described as removing them from the war tally. Each of these items is a data point in a conflict that is simultaneously paused and continuing.
The IAEA chief, in a call with Pakistan’s Foreign Minister Ishaq Dar, expressed hope that “the parties would sustain dialogue and engagement following the Islamabad Memorandum of Understanding.” Sustaining dialogue is different from concluding a deal. Pakistan knows that. The IAEA chief calling Dar rather than the US or Iranian foreign ministers to express that hope says something about where the process still sits: Islamabad is holding the thread.
