Oil prices experienced a significant decline after US President Donald Trump announced on Sunday that he had halted a large-scale attack on Iran, opting instead for negotiations. Trump stated that allies in the Middle East, including Saudi Arabia, requested a deal be pursued. This move caused Brent crude for October to lose as much as 7.3%, following a surge of almost a quarter in July, which marked its largest monthly gain since March. West Texas Intermediate also fell below $80.
Trump further explained on Truth Social that he agreed to cancel the assault "subject to being able to rapidly make a DEAL" to swiftly reopen the Strait of Hormuz. The easing of geopolitical risk premium was cited as a major factor in the oil price drop. According to Takahiro Asaoka, a commodities researcher at Ochu Research Institute Inc., "The drop is a reflection of relief that further escalation has been avoided."
The announcement led to speculation about renewed talks, with Trump indicating discussions would resume on Monday. The market's reaction, largely driven by short covering, reflected optimism that a direct military confrontation had been averted. However, analysts cautioned that a sustained decline in oil prices would be difficult without a concrete agreement that allows unimpeded shipping through the Strait of Hormuz.
