Oil prices fell sharply on Monday as traders reduced the geopolitical premium built into crude after President Donald Trump paused a new US strike on Iran and pushed for negotiations over Tehran’s nuclear programme and the Strait of Hormuz.
Brent crude futures dropped $4.65, or 5.29 percent, to $83.28 a barrel by 0802 GMT. West Texas Intermediate fell $5.20, or 6.14 percent, to $79.47, according to market data.
Brent and WTI surrender July gains
The reversal came after both benchmarks climbed more than 20 percent in July. Renewed fighting between the United States and Iran, combined with attacks on commercial vessels near Oman, had raised fears that Gulf exports could be severely restricted.
Trump said Iran and several Middle Eastern governments had requested additional time to complete an agreement.
He said any arrangement should deliver a “complete and total” reopening of Hormuz while addressing concerns over Iran’s nuclear activities. The market liked the pause. It has not declared the crisis over.
Hormuz risk has not disappeared
Hormuz remains the hinge of the market because exporters across the Gulf depend on the waterway. Traffic there slowed after vessel incidents were reported, although two tankers carrying Saudi crude crossed the Bab el Mandeb Strait and moved out of the Red Sea during the weekend.
United Kingdom Maritime Trade Operations issued new tanker security alerts around Oman. The warnings kept physical supply concerns alive even as futures prices responded to Trump’s decision.
Oil traders are therefore pricing two stories at once. Diplomacy points towards lower risk, but restricted shipping still threatens the movement of actual barrels.
OPEC+ adds supply pressure
Supply policy added another downward influence. OPEC+ approved a production adjustment of about 188,000 barrels per day for September, completing another stage in the rollback of voluntary output cuts.
The increase was agreed by Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman during a virtual meeting on Sunday. The group said it would continue reviewing market conditions monthly.
Export disruptions linked to conflicts affecting the Gulf, Russia and Kazakhstan have limited the impact of earlier OPEC+ increases.
Monday’s decline was substantial, but it mainly reflected relief rather than certainty. A durable fall in prices will depend on whether talks produce a credible Hormuz agreement, vessel traffic normalises and planned OPEC+ barrels reach the market.
Until then, crude remains tied less to comfortable supply forecasts than to the next diplomatic statement or maritime warning.
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