Oil slumps over 6% as Trump calls off Iran strike, announces fresh talks

Oil prices experienced a significant drop of over 6% in Asian trade on Monday, hitting their lowest levels in three weeks. The decline occurred as U.S. President Donald Trump announced that negotiations with Iran would resume later that day, following his decision to call off a planned military strike. Brent Oil Futures for October and West Texas Intermediate (WTI) crude futures for September both decreased by 5.7% and 6.5% respectively, reaching $82.94 per barrel and $79.16 per barrel.

Both contracts had fallen more than 5% the previous week but marked an impressive monthly increase of over 20% in July. The President's announcement came after Tehran and several Middle Eastern countries requested time for negotiations. Trump had claimed the deal would include the immediate, complete, and total opening of the Hormuz Strait and an end to Iran's nuclear threat. He also stated that the U.S. remained prepared to attack Iran if diplomacy failed.

Oil prices had experienced a brief rise last week as the conflict extended beyond the Gulf region, raising concerns about broader disruptions to regional energy infrastructure and shipping routes. Iran-backed groups had carried out drone attacks on Saudi oil facilities, while strikes targeted natural gas vessels in Egypt's Damietta port and disrupted shipping routes in both the Strait of Hormuz and the Red Sea.

These events led to a temporary surge in Brent crude prices above $90 a barrel. However, the latest decline in crude prices was attributed to OPEC+’s decision to raise production quotas by approximately 188,000 barrels per day from September. This move came after the completion of a series of voluntary output cuts introduced in 2023.

While past quota increases had minimal impact due to supply disruptions in Iran, Russia, and Kazakhstan, the latest decision indicated OPEC+’s commitment to gradually restore output as geopolitical risks appeared to ease.