Oil Prices Tumble Over 6% Amid Hopes for US-Iran Diplomatic Breakthrough

Oil prices tumbled more than 6% on Monday as hopes of a diplomatic breakthrough between the United States and Iran erased part of last month's rally. However, uncertainty over the negotiations and persistent security risks along key shipping routes has kept investors on edge. As of 7:10 am, WTI crude was down 4.75% at $80.65 a barrel, while Brent crude fell 4.40% to $84.06 a barrel. Earlier, Brent crude futures dropped more than 6% to $82.41 after US President Donald Trump said talks with Iran would be held on Monday. The announcement followed his decision to call off an imminent attack on Iran in a bid to reach an agreement to reopen the Strait of Hormuz and resolve the deadlock over Tehran's nuclear capabilities. The sharp decline followed a rally of more than 20% in both benchmark contracts last month, fuelled by renewed conflict between the US and Iran and attacks on several tankers near Oman. The incidents heightened security concerns and discouraged shippers from entering the Gulf to load oil. Trump also signalled a possible easing of tensions over the weekend. Writing on his Truth Social platform late on Saturday, he said Iran and other Middle Eastern countries had asked for time to finalise a deal that would ensure "the Immediate, Complete and Total" reopening of the Strait of Hormuz and "an end to Iran's nuclear threat". While hopes of an agreement lifted sentiment, questions remained over whether the diplomatic effort would succeed. "The bigger focus is whether this week turns into a rinse and repeat of last week — with hopes of a deal collapsing as Iran digs in its heels and continues to leverage its control over the Strait, potentially through an attack on a US base or a tanker transiting the waterway," IG market analyst Tony Sycamore told Reuters. Meanwhile, developments in regional shipping painted a mixed picture. Shipping data showed two Saudi oil tankers crossed the Bab el-Mandeb Strait from the Red Sea over the weekend, while movement through the Strait of Hormuz slowed following reports of vessel attacks. The United Kingdom Maritime Trade Operations said three more tanker attacks had been reported since Saturday. Separately, OPEC+ agreed on Sunday to raise its oil production quota by around 188,000 barrels a day from September, completing the unwinding of one layer of voluntary output cuts. Even with the planned increase, the market has seen little impact. Export disruptions in the Gulf, Russia and Kazakhstan caused by the Iran and Ukraine wars have meant most of OPEC+'s monthly output hikes this year have not translated into additional supply.