In a move that has surprised many market watchers, crude prices have declined sharply this week — including a 7% rout on Monday — despite the clash that saw America bomb Iran’s nuclear programme and Tehran retaliate against US bases in the region.

The conventional wisdom used to be that conflicts in the Middle East would send oil prices soaring.

But the ceasefire agreed between Israel and Iran following a more than week-long conflict pushed oil prices lower on Tuesday, easing policymaker and market concerns about it stoking inflation.

Oil prices pared some of their earlier losses as US President Donald Trump accused both sides of violating the truce and called on Israel to stop dropping bombs, while insisting the accord would ultimately hold.

The conflict appears to be moving toward a de-escalation phase, with oil supplies from the Arabian Gulf continuing unabated and no interruption to the Strait of Hormuz, which traders had feared could be blocked.

Around 14.2mn barrels of crude oil and 5.9mn barrels of other petroleum products pass through the strait per day, representing around 20% of global production in the first quarter, according to the US Energy Information Administration (EIA).

The Middle East accounts for about a third of global crude production and there haven’t yet been any signs of disruption to physical oil flows, including for cargoes going through the Strait of Hormuz.

Since Israel’s attacks began earlier this month, there have been signs that Iranian oil shipments out of the Gulf have risen rather than declined.

In a sign of reduced tensions, Brent’s prompt spread — the difference between its two nearest contracts — narrowed to 99 cents a barrel in backwardation. While that’s still a bullish pattern, with nearer-term prices above those further out, it’s down from last week’s closing peak of $1.77.

The Opec+ alliance — which includes Iran — has been reactivating idled capacity at a rapid clip in a bid to recapture market share. The group is due to hold a video-conference July 6 to consider a further supply hike in August.

“In a week and a half, Opec+ will agree to increase production by another 400,000 barrels a day,” said Robert Rennie, head of commodity and carbon research at Westpac Banking Corp. “As we move into the third quarter — and global production rises and demand wanes, driving inventory sharply higher — we will see prices probing the lower end of the previous $60-to-$65 range.”

According to a Bloomberg report, oil markets have learned not to increase prices because of the fear of a future disruption in supply. Because often, those disruptions haven’t materialised.

Also, the Middle East conflict comes in ‘post-US shale revolution era.’ The US has gone from producing around 7.5mn barrels a day 20 years ago to almost 21mn barrels today.

And its dependence on the flow of oil from the Strait of Hormuz has come down significantly.

The price slump brings the market back to where it was before Israel attacked Iran on June 12. Traders are looking toward a looming surplus later in the year, with a supply surge from producers both inside and outside the Opec+ alliance set to outpace growth in demand.

The pullback also offers a fresh reminder that geopolitical disruptions to crude prices can ultimately be short-lived.

“The geopolitical risk premium built up since the first Israeli strike on Iran almost two weeks ago has entirely vanished,” said Tamas Varga, an analyst at brokerage PVM. “There are growing hopes that investors will be able to focus on economic policies instead of geopolitics.”

Still, lower crude dents the economies of producer nations, particularly in the Middle East, and will refocus discussions around the financial health of major oil companies.