Oil Tumbles as Trump Cancels Attack on Iran to Reach Nuclear Deal

Oil prices tumbled more than $4 a barrel on Monday, erasing recent gains as U.S. President Donald Trump paused a planned military strike against Iran. Trump indicated a desire to reach a quick deal that would halt Tehran's nuclear ambitions and ensure the reopening of the vital Strait of Hormuz.

Brent crude futures slid $4.49, or 5.11%, to $83.44 a barrel, while U.S. West Texas Intermediate (WTI) crude was down $4.90, or 5.79%, settling at $79.77. Both benchmarks had surged more than 20% in the previous month amid heightened tensions between the U.S. and Iran and attacks on several tankers near Oman. These security concerns had deterred shippers from entering the Gulf to load oil.

In a sign of de-escalation, Trump announced on his Truth Social platform that Iran and other Middle Eastern countries had requested time to finalize an agreement. This potential deal aims for the "Immediate, Complete and Total" reopening of the Strait of Hormuz and an end to Iran's nuclear program.

Market analysts expressed caution, questioning whether hopes for a deal would hold. "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 U.S. base or a tanker transiting the waterway," said IG market analyst Tony Sycamore.

Over the weekend, two oil tankers transited the Bab el-Mandeb Strait, while traffic in the Strait of Hormuz slowed following reports of vessel attacks. The United Kingdom Maritime Trade Operations reported three additional tanker incidents since Saturday. Meanwhile, OPEC+ approved an oil production quota increase of approximately 188,000 barrels per day from September, though previous quota hikes have had minimal impact on the market due to export disruptions.

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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.