Key facts
- President Donald Trump announced a pause on new U.S. strikes against Iran.
- Hopes for a diplomatic resolution to the conflict and reopening of the Strait of Hormuz have increased.
- WTI futures fell 5.88% to $79.77 per barrel.
- Brent futures fell 5.07% to $83.47 per barrel.
- OPEC+ approved a production quota increase of 188,000 barrels per day for September.
Oil prices experienced a sharp decline in early Asian trade on Monday following President Donald Trump's announcement that the U.S. would halt further military strikes against Iran. This move has raised hopes for a diplomatic resolution to the conflict and the potential reopening of the Strait of Hormuz, a critical shipping lane. West Texas Intermediate (WTI) futures fell 5.88% to $79.77 per barrel, while Brent futures were down 5.07% to $83.47.
The recent selloff follows a volatile July where both benchmarks surged over 20% due to renewed hostilities between the U.S. and Iran and Houthi blockades of Saudi ports, which stoked fears of prolonged supply disruptions. Trump had warned of a major attack against Iran on Saturday but subsequently called it off, citing assurances from regional leaders that a deal was imminent.
Despite the de-escalation, maritime risks remain elevated, with the UK Maritime Trade Operations agency reporting three additional tanker attacks since Saturday. However, two Saudi oil tankers successfully transited the Bab el-Mandeb Strait over the weekend. Adding to downward price pressure, OPEC+ approved a production quota increase of approximately 188,000 barrels per day for September, though actual output increases have been limited.
Iranian officials indicated that negotiations with Oman over a new shipping arrangement through the Strait of Hormuz are in their final stages. If negotiations succeed and regional shipping normalizes, much of the geopolitical premium built into oil prices in July could unwind. However, any renewed military escalation or disruption to Gulf exports could send crude prices surging again.