Oil prices dropped approximately 5 percent to a three-week low on Monday after U.S. President Donald Trump held off on a fresh attack on Iran, citing the prospect of a swift deal that could increase Gulf oil supplies. The pullback underscored how quickly geopolitical rhetoric can move energy markets, with prices swinging on the gap between a U.S. president's statements and the response from the country at the center of the conflict.

Brent futures fell $4.19, or 4.8 percent, to $83.74 a barrel at 12:40 p.m. ET (1640 GMT). U.S. West Texas Intermediate (WTI) crude declined $4.92, or 5.8 percent, to $79.75. The shift placed Brent on course for its lowest close since July 13, partly driven by the October futures contract becoming the front-month after the costlier September contract expired on Friday.

Iran Rejects Claim of Ongoing Talks

Iran stated on Monday that no talks were underway with the United States and none were planned, directly contradicting Trump, who had cited impending negotiations as justification for calling off the attacks. Iran's Foreign Ministry spokesman Esmail Baghaei dismissed the assertion, confirming that no negotiations were taking place and no meetings had been scheduled. He added that Iran had no intention of hosting foreign delegations or dispatching negotiators abroad in the coming days. The denial left open the question of whether the market's rally on a potential deal was based on a premise that one party to the negotiations says does not exist.

Over the weekend, Trump repeated a pattern observed throughout the past five months: announcing plans for "massive attacks" on Iran, only to reverse course at the last minute.

Analysts See Market Overreaction

"Today's sharp selloff ... in crude futures looks like another overreaction to Trump's comments that a deal with Iran is imminent following his weekend threats of massive attacks that were also suggested as imminent," analysts at energy advisory firm Ritterbusch and Associates said in a note.

"Trump is continuing a pattern of occasionally talking the oil market lower in precluding a sustained advance in gasoline prices," the Ritterbusch analysts added.

On Monday, Trump once again urged oil companies to reduce gasoline prices for American consumers, criticizing Chevron Chief Executive Mike Wirth for not acknowledging his administration's efforts to support the oil industry. Gasoline prices are a politically sensitive metric for any U.S. administration, with pump costs closely tracked by voters and often cited as a barometer of economic health.

Meanwhile, India raised windfall taxes on fuel exports, a move designed to ensure adequate domestic supply and bolster state revenues amid continued price volatility driven by the Middle East conflict, according to a government order. India is one of the world's largest oil importers and consumers, making it especially exposed to supply disruptions and price swings originating in the Gulf.

Saudi Supertankers Reroute

Six Saudi-flagged supertankers changed course in the Gulf of Aden in recent days, diverting toward southern Africa after the Iran-backed Houthi movement in Yemen threatened to target Saudi shipping, tracking data showed on Monday. The longer route around the Cape of Good Hope adds significant transit time and cost compared with passage through the Red Sea and Suez Canal. However, over the weekend, two tankers carrying Saudi oil successfully transited the Bab el-Mandeb Strait between the Red Sea and the Gulf of Aden. Traffic through the Strait of Hormuz between Iran and Oman meanwhile slowed following reports of vessel attacks.

Prior to the U.S. and Israel launching strikes on Iran on February 28, roughly a fifth of global oil and liquefied natural gas supplies passed through the Strait of Hormuz, making it one of the most critical chokepoints for world energy trade.

Elsewhere in the region, Iraq sold approximately 42 million barrels of oil in July, comprising 35.5 million barrels from southern ports and 7 million from Turkey's Ceyhan terminal, according to the director general of Iraq's state oil marketer SOMO, speaking to Dijlah TV.

Russian Shipping Adjustments

A Panama-flagged tanker transporting Russian naphtha attempted to transit the Bab el-Mandeb in the final week of July before diverting to sail around Africa, trade sources and shipping data from LSEG confirmed.

Russia announced on Monday that it was enhancing protection for ships in the Azov-Black Sea basin and developing alternative cargo routes, following a sharp escalation in maritime attacks by both sides in the Ukraine war. The Russian transport ministry stated that in response to "the tense situation in the Sea of Azov stemming from hostile drone attacks on maritime vessels," it had established a task force to identify new routes and redirect cargo to other transport modes.

Russia ranked as the world's third-largest crude oil producer in 2025, behind the U.S. and Saudi Arabia, according to U.S. energy data. It is a member of OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

Export disruptions from the Gulf, Russia, and Kazakhstan — stemming from the Iran and Ukraine conflicts — have meant that successive monthly OPEC+ production increases over much of this year have not resulted in additional oil reaching the market. The gap between announced quota hikes and actual supply reaching buyers highlights how physical disruptions can offset policy decisions by producer groups. On Sunday, OPEC+ approved a production quota increase of approximately 188,000 barrels per day effective from September.