Oil prices fell sharply during Asian trading on Monday. Brent and WTI crude dropped to their lowest levels in three weeks after U.S. President Donald Trump cancelled a planned military strike on Iran and announced fresh negotiations.
Brent and WTI Fall Nearly 5%
At 20:46 ET, Brent crude futures for October delivery fell 4.8% to $83.68 per barrel.
West Texas Intermediate crude declined 4.9% to $80.50 per barrel.
Both oil benchmarks lost more than 5% during the previous week. However, they still recorded monthly gains of more than 20% in July.
Trump Cancels Planned Iran Attack
Trump said on Sunday that he had cancelled what he described as a major U.S. military operation against Iran.
According to the president, Tehran and several Middle Eastern governments had requested additional time for diplomatic talks.
Negotiations were expected to begin on Monday. The discussions would focus on reopening the Strait of Hormuz and addressing concerns about Iran’s nuclear programme.
The decision reduced fears of an immediate military escalation and weakened the geopolitical risk premium built into oil prices.
Conflict Had Driven Brent Above $90
Oil prices briefly rose during the previous week as the conflict spread beyond the Gulf.
Iran-backed groups reportedly launched drone attacks against Saudi oil facilities. Strikes also hit natural gas vessels at Egypt’s Damietta port.
Shipping routes in the Strait of Hormuz and the Red Sea were also targeted. These developments raised concerns that several major energy transit routes could face disruption.
The escalation briefly pushed Brent crude above $90 per barrel.
Strait of Hormuz Remains Crucial
The Strait of Hormuz is one of the world’s most important oil shipping routes.
Any prolonged disruption could reduce global energy supplies and place upward pressure on crude prices.
The prospect of renewed negotiations reduced some of those concerns. Investors now appear more hopeful that shipping through the region can continue without a major interruption.
OPEC+ Production Increase Adds Pressure
Oil prices faced additional pressure after OPEC+ agreed to increase its production quotas.
The group said it would raise output targets by around 188,000 barrels per day from September.
The move completes the reversal of another layer of voluntary production cuts introduced in 2023.
Producers Continue Restoring Supply
Previous OPEC+ quota increases had a limited effect on actual supply. Production disruptions in Iran, Russia and Kazakhstan prevented some members from reaching their targets.
However, the latest decision shows that the group remains committed to gradually restoring output.
The combination of higher planned production and easing geopolitical risks added to the downward pressure on oil prices at the start of the week.
