West Texas Intermediate crude futures dropped more than 6% to $79.10 per barrel on Monday, while Brent crude futures fell more than 5% to $82.99 a barrel.
The sharp selloff came after President Donald Trump announced he had called off a planned military strike against Iran following diplomatic outreach from Tehran and regional allies.
Trump posted on Truth Social early Sunday explaining his decision, citing a request from Iran and other Middle Eastern nations to pause any planned military action.
“We have just been asked by Iran, and other Middle Eastern Countries, to hold off any attack in that the perimeters of a deal has been agreed to,” Trump wrote in his Truth Social post.
Trump said the proposed agreement would include the “Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran’s nuclear threat.”
Speaking aboard Air Force One on Sunday, Trump said Saudi Arabia and other Middle Eastern allies urged him to pursue a diplomatic agreement rather than proceed with the strike.
Iran pushed back on Monday, stating there were no active talks with the United States and no meetings planned, directly contradicting Trump’s framing of the situation.
The dramatic price drop suggests traders are unwinding the significant war premium that had been built into crude prices over several weeks of escalating tensions.
Oil markets had already experienced a highly volatile stretch, with both WTI and Brent surging more than 20% during July amid renewed U.S.-Iran hostilities and a Houthi blockade of Saudi ports.
Those earlier gains were driven largely by fears of prolonged supply disruptions through the Strait of Hormuz and the Red Sea, two of the world’s most critical shipping corridors.
Adding further downward pressure to prices, the OPEC+ group approved a production quota increase of roughly 188,000 barrels per day for September, completing the unwinding of one layer of its voluntary output cuts.
On the shipping front, two Saudi oil tankers successfully transited the Bab el-Mandeb Strait over the weekend, offering some reassurance that Red Sea traffic remained operational.
However, the United Kingdom Maritime Trade Operations agency reported three additional tanker attacks since Saturday, signaling that maritime risks in the region remain elevated.
Analysts cautioned that the current price retreat could reverse rapidly if diplomatic negotiations collapse or attacks on shipping lanes resume at scale.
