Oil prices fell sharply on Monday after President Donald Trump delayed threatened military action against Iran, raising hopes that renewed diplomacy could eventually ease supply disruptions and restore oil exports from the Gulf. Despite the steep decline, markets remained highly sensitive to developments surrounding the conflict, with uncertainty over shipping through key Middle Eastern trade routes continuing to support an underlying geopolitical risk premium.
Brent crude settled at $83.77 per barrel, down 7.0%, while West Texas Intermediate (WTI) fell 5.1% to close at $80.34 per barrel. Both benchmarks posted their lowest settlements in roughly three weeks as traders reacted to expectations that military escalation may be postponed in favor of negotiations.
Although President Trump stated that discussions with Iran were underway, Iranian officials denied that any negotiations or meetings had been scheduled. Markets interpreted the delay in military action as reducing the immediate risk of additional supply disruptions, even as tanker traffic through the Strait of Hormuz and the Bab el-Mandeb Strait remained below normal levels. Several Saudi tankers also altered their routes to avoid security risks in the region, underscoring that shipping concerns remain elevated despite the pullback in crude prices.
Broader supply risks also persist outside the Middle East, with continued disruptions to Russian and Kazakh export routes limiting the impact of recent OPEC+ production increases. While easing expectations for near-term military action weighed heavily on prices, the market remains vulnerable to renewed volatility as geopolitical tensions continue to threaten global energy flows.