Crude oil prices dropped sharply on Monday, falling more than 6% during Asian trading after U.S. President Donald Trump announced that diplomatic talks with Iran would resume, prompting investors to reduce expectations of an immediate military escalation in the Middle East.
By 02:51 ET (06:51 GMT), October Brent crude futures had fallen 5.7% to $82.94 per barrel, while September West Texas Intermediate (WTI) futures declined 6.5% to $79.16 per barrel.
Despite Monday’s sell-off, both benchmarks still posted gains of more than 20% during July, even after losing more than 5% over the previous week.
Trump Pauses Military Action in Favour of Diplomacy
Late on Saturday, President Trump said he had decided not to proceed with a planned large-scale military strike against Iran after Tehran and several Middle Eastern countries requested additional time to pursue negotiations.
“This (deal) would include the Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran’s nuclear threat,” Trump wrote in a Truth Social post.
While signalling support for diplomacy, Trump also stressed that military action remained an option if negotiations failed to produce an agreement.
The announcement encouraged traders to scale back fears of an immediate disruption to global oil supplies, triggering broad selling across crude markets.
Geopolitical Tensions Had Previously Driven Oil Higher
Oil prices had surged during the previous week after the conflict expanded beyond the Gulf region, raising concerns that critical energy infrastructure and key shipping routes could become increasingly vulnerable.
Iran-backed forces launched drone attacks on Saudi Arabian oil facilities, while strikes targeted natural gas vessels at Egypt’s Damietta port. Shipping lanes through both the Strait of Hormuz and the Red Sea also came under pressure, reinforcing fears that multiple strategic energy corridors could be disrupted.
Those developments briefly pushed Brent crude above $90 per barrel before sentiment reversed following Trump’s latest announcement.
OPEC+ Decision Adds to Downward Pressure
Crude prices also weakened after OPEC+ agreed on Sunday to increase production quotas by approximately 188,000 barrels per day from September.
The decision completes the reversal of one stage of the voluntary production cuts introduced in 2023 as the producer group gradually restores supply.
Earlier quota increases had only a limited effect because production disruptions in Iran, Russia and Kazakhstan offset much of the additional output. However, the latest move suggests OPEC+ believes improving geopolitical conditions now provide greater scope to increase production without destabilising the market.
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