Oil prices fell sharply on Monday, dropping more than 6% during Asian trading after U.S. President Donald Trump announced that planned negotiations with Iran would move forward later in the day following his decision to cancel a proposed military strike.
At 02:51 ET (06:51 GMT), Brent crude futures for October delivery declined 5.7% to $82.94 per barrel, while September West Texas Intermediate (WTI) crude futures dropped 6.5% to $79.16 per barrel.
Although both benchmarks had already fallen more than 5% last week, they still recorded gains of more than 20% over the course of July.
Diplomatic Breakthrough Weighs on Energy Markets
Late on Saturday, President Trump revealed that he had halted plans for a large-scale U.S. military operation against Iran after Tehran and several Middle Eastern nations requested additional time for diplomatic 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.
The president also warned that military action remained an option should diplomatic efforts fail.
The announcement prompted investors to reassess the likelihood of disruptions to global oil supplies, triggering broad selling across energy markets.
Regional Conflict Had Driven Oil Higher
Crude prices had rallied briefly during the previous week as fighting expanded beyond the Gulf, increasing concerns that the conflict could threaten critical energy infrastructure and shipping routes.
Iran-backed groups carried out drone attacks targeting oil facilities in Saudi Arabia, while separate strikes hit natural gas vessels at Egypt’s Damietta port. Shipping routes through both the Strait of Hormuz and the Red Sea also came under attack, heightening fears that multiple strategic energy corridors could be affected.
At the height of those concerns, Brent crude temporarily climbed above $90 per barrel.
OPEC+ Production Increase Adds Further Pressure
Oil prices came under additional pressure after OPEC+ announced on Sunday that it would raise production quotas by approximately 188,000 barrels per day beginning in September.
The move completes the reversal of one round of voluntary production cuts introduced by the producer group during 2023.
Previous production increases had a limited impact because supply disruptions in countries including Iran, Russia and Kazakhstan offset much of the additional output. However, the latest decision suggests OPEC+ believes market conditions are improving sufficiently to continue restoring production as geopolitical risks begin to ease.