Oil tumbles as Trump cancels attack on Iran to reach deal aimed at reopening Hormuz

On Monday, oil prices fell sharply following US President Donald Trump's decision to abandon plans for a military strike against Iran. The aim was to secure a deal that would reopen the strategically vital Strait of Hormuz, a critical trade route. The price of Brent crude futures dropped by $4.49, or 5.11 percent, to $83.44, while US West Texas Intermediate crude fell by $4.90, or 5.79 percent, to $79.77 a barrel.

Both contracts had surged more than 20 percent last month due to renewed fighting between the US and Iran, as well as attacks on several tankers around Oman, which raised security concerns and deterred shippers from using the Gulf to transport oil.

In a statement posted on his Truth Social platform, Trump indicated that Iran and other Middle Eastern nations had requested a delay to complete a deal that would lead to "the Immediate, Complete and Total" reopening of the strait and "an end to Iran’s nuclear threat." Analysts are closely watching to see if this week's developments will be a repeat of the previous week's negotiations, with concerns that Iran may continue to leverage its control over the Strait, potentially through an attack on a US base or a tanker traversing the waterway.

Since Saturday, two tankers carrying Saudi oil have navigated the Bab el-Mandeb Strait, located at the southern tip of the Red Sea, to avoid the Strait of Hormuz. However, traffic in the Strait of Hormuz has slowed down following reports of vessel attacks. The United Kingdom Maritime Trade Operations has reported three additional tanker attacks since Saturday.

On Sunday, Opec+ approved a production quota increase of approximately 188,000 barrels per day effective from September. This move completes the unwinding of voluntary output cuts initiated earlier this year. However, the impact of these successive monthly hikes from Opec+ has been limited, as export disruptions caused by the Iran-Ukraine conflicts have affected oil markets in Russia and Kazakhstan.