Oil Prices Plunge 7% as Trump Pauses Iran Strikes, Restarts Talks

TradingKey - Global oil prices plunged during Asian trading hours on Monday. U.S. President Trump announced a pause on a new round of military action against Iran and will restart negotiations regarding the nuclear issue and the Strait of Hormuz, significantly cooling market concerns over crude supply disruptions in the Middle East. Meanwhile, OPEC+ decided to continue raising its production targets in September, piling further downward pressure on oil prices.

In early Asian trading, Brent crude ( UKOIL) fell over 7%, dropping below $83 per barrel, while WTI crude ( USOIL) fell nearly 8%.

Source: TradingKey

Source: TradingKey

Trump said on Sunday evening that negotiations between the U.S. and Iran would officially begin on Monday afternoon, with topics including transit arrangements in the Strait of Hormuz and the Iranian nuclear issue. He also stated that an agreement concerning the reopening of the strait could make progress soon.

Previously, the U.S. had planned to launch a large-scale military strike against Iran on Saturday. Trump said he decided to call off the action after Saudi Arabia, the UAE, Qatar, and Iran proposed continuing negotiations. However, he emphasized that the U.S. still retains the option to take military action if diplomatic efforts fail to yield results.

Iran's response was relatively cautious. Iranian Foreign Minister Araghchi stated that consultations with Oman regarding the Strait of Hormuz have entered their final stages. Meanwhile, Iran's Foreign Ministry said both sides are discussing the establishment of a mutually recognized transit route for vessels, but no agreement has been reached yet on fully restoring navigation through the strait, and Tehran's current policy stance remains unchanged.

Over the past two weeks, military conflicts between the U.S. and Iran continued to escalate, with the market temporarily fearing that the fighting would spread to energy facilities and major shipping lanes in the Persian Gulf. Iranian-backed armed groups attacked Saudi oil facilities, and shipping security around the Red Sea and the Strait of Hormuz was also threatened, briefly pushing Brent crude above $90 per barrel. As the U.S. canceled its strike plans and turned to negotiations, the geopolitical risk premium previously priced into oil fell rapidly.

At the same time, changes on the supply side also put pressure on oil prices. OPEC+ decided on Sunday to raise crude production targets for its member countries by 188,000 barrels per day starting in September, marking the group's sixth consecutive monthly output increase. The next production policy meeting is scheduled for September 6.

Due to previous supply disruptions in Iran, Russia, and Kazakhstan, previous quota increases by OPEC+ did not fully translate into actual production growth, so the short-term impact of this decision may be relatively limited. However, if tensions in the Middle East continue to ease and the Strait of Hormuz gradually resumes normal transit, major oil-producing countries like Saudi Arabia will have more room to increase production, and global crude supply tightness could further ease.