Oil prices saw a decline after US President Donald Trump announced that new negotiations with Iran would begin on Monday, following his choice to abort a planned military strike on the country.
Brent crude for October dropped by as much as 7.3%, after futures had surged nearly 25% in July, marking the largest monthly rise since March. West Texas Intermediate fell below $80. On Sunday, Trump indicated that he decided against a significant military action in Iran after requests from Middle Eastern allies, including Saudi Arabia, urged him to seek a diplomatic resolution instead.
The US president stated he called off the military operation, “contingent upon quickly reaching a DEAL” to facilitate the reopening of the Strait of Hormuz, according to a prior post on Truth Social. “Let’s get to work, everyone, and make it happen.”
“The drop symbolizes relief that further escalation has been avoided,” noted Takahiro Asaoka, a commodities analyst at Itochu Research Institute Inc. “This movement seems primarily driven by short covering as the geopolitical risk premium lessens. A sustained decrease in oil prices is tough unless a deal is reached that restores normal shipping through the Strait of Hormuz.”
Last month, Brent prices fluctuated within a $32 range as hostilities escalated following the breakdown of a ceasefire in June. The conflict extended to the Red Sea and Jordan, although another diplomatic pause in late July was later disrupted.
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European natural gas prices decreased by as much as 6.3% during early trading in Asia.
Oil futures regained some losses after UK Maritime Trade Operations reported an explosion near a tanker off Oman on Sunday. This incident highlighted the ongoing risks of shipping through Hormuz, which accounts for around one-fifth of global crude oil and liquefied natural gas transport during peacetime—following an earlier projectile strike on an LNG vessel late last week.
At the same time, Gulf producers are actively exploring alternative export routes. Turkey and Iraq have decided to extend a lapsed oil pipeline agreement for another year, which could allow for the export of up to 750,000 barrels a day, according to Iraq’s Oil Ministry.
Iranian Foreign Minister Abbas Araghchi noted on Telegram that negotiations between Iran and Oman are close to completion. The two neighboring countries are discussing a new route through the strait, but these talks do not clarify whether the waterway will remain closed or open, as stated by a ministry spokesperson on Iranian state television.
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In other developments, major OPEC+ nations have approved a slight increase in their production quotas, a move that will theoretically restore supplies halted in 2023 and give them the ability to boost output once the conflict in the Middle East concludes.
Additionally, Kazakhstan’s Energy Ministry has confirmed that the Caspian Pipeline Consortium is currently operating at an oil intake rate of 100,000 tons a day starting from August 1 after a temporary halt on Friday. While the CPC will permit vessels to load, export rates will depend on the willingness of tankers to navigate the potentially hazardous journey.
Ongoing attacks on tankers near the Black Sea loading facility have limited flows from the CPC, which is a crucial export route for Kazakh crude oil.
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