Oil prices fell more than 6% during Asian trading on Monday, dropping to three-week lows after U.S. President Donald Trump announced that negotiations with Iran would resume later in the day, following his decision to call off a planned military strike against the country.

As of 02:51 ET (06:51 GMT), Brent crude futures for October delivery dropped 5.7% to $82.94 per barrel, while West Texas Intermediate (WTI) crude futures for September settlement declined 6.5% to $79.16 per barrel. Both contracts had lost more than 5% the previous week but still recorded a monthly gain exceeding 20% in July.

Speaking late Saturday, President Trump said he had canceled a large-scale planned U.S. military operation against Iran after Tehran and several Middle Eastern nations requested time to pursue diplomatic negotiations.

"This (deal) would include the Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran's nuclear threat," Trump wrote in a post on Truth Social. He added that the United States remained prepared to launch an attack on Iran should diplomacy fail. The Strait of Hormuz, located between Iran and Oman, is the world's most critical oil transit chokepoint, with roughly one-fifth of global oil consumption passing through it daily, making any disruption there a central driver of crude price volatility.

Oil prices had briefly climbed last week as the conflict extended beyond the Gulf region, fueling concerns about broader disruptions to energy infrastructure and maritime shipping. Iran-backed groups carried out drone strikes on Saudi oil facilities, while additional attacks targeted natural gas vessels at Egypt's Damietta port and shipping lanes in both the Strait of Hormuz and the Red Sea. The escalation raised fears that the conflict was spreading across multiple critical energy transit routes and briefly drove Brent crude above $90 per barrel.

The downward pressure on crude prices was further reinforced by OPEC+'s decision on Sunday to increase production quotas by approximately 188,000 barrels per day starting in September, finalizing the reversal of a tranche of voluntary output cuts that were introduced in 2023. Although previous quota hikes had minimal market impact due to ongoing supply disruptions in Iran, Russia, and Kazakhstan, the latest adjustment indicated the producer alliance remains committed to gradually restoring output as geopolitical risks appear to be subsiding. The unwind is part of a broader OPEC+ roadmap to phase out roughly 2.2 million barrels per day of voluntary cuts over monthly installments through September 2025, depending on market conditions.

Source: Investing.com