Global oil prices fell at the start of Monday’s trading after US President Donald Trump said further American attacks on Iran were highly unlikely as discussions to end the conflict appeared to be making progress. The comments eased some immediate concerns about a wider military escalation, although reports of attacks on vessels around the Strait of Hormuz continued to create uncertainty for energy markets.
Brent crude futures dropped 84 cents, or 0.85 per cent, to $97.48 a barrel by 0138 GMT. US West Texas Intermediate (WTI) crude declined 32 cents, or 0.35 per cent, to $90.51 per barrel.
The latest decline reversed modest gains recorded at Friday’s settlement. Investors continued to assess whether diplomatic progress could reduce the risk of further attacks and restore stability to oil shipments from the Middle East.
Trump Comments Ease Immediate Market Concerns
Speaking to CNN in a phone interview, Trump said he was highly unlikely to order new attacks on Iran if the two sides reached a strong agreement.
“It depends on whether or not they sign a very strong agreement,” Trump said, adding that further military action was unlikely to be necessary.
His remarks appeared to reduce concerns that Washington was preparing for another major round of strikes. Trump had previously suggested that attacks on Iran could resume following last week’s US midterm elections. However, the reported developments have not been followed by signs of a large-scale American military operation.
Iran has warned that it would respond to any renewed US attacks by targeting American and Israeli interests.
Tim Waterer, chief analyst at KCM Trade, described Trump’s comments as more measured but cautioned that investors were still waiting to determine whether the political developments represented a lasting change in the administration’s approach or only a temporary shift in tone.
For traders, the possibility of renewed military action remains an important factor when assessing the direction of crude prices.
Brent Crude Records Sharp Weekly Decline
Although oil prices fall at the start of Monday’s session, the larger development has been Brent crude’s significant decline over the previous week.
Brent lost approximately 17 per cent last week, marking its steepest weekly percentage decline since the beginning of the COVID-19 pandemic. It was also the largest fall in absolute terms, according to LSEG data dating back to 1988.
The sharp movement reflects changing expectations about the conflict, future oil supplies and global demand. Prices had been influenced by fears that military escalation could disrupt shipments through the Strait of Hormuz, one of the world’s most important routes for transporting crude oil and other energy products.
A reduction in immediate geopolitical concerns can ease the risk premium built into oil prices. However, continued reports of attacks and shipping disruptions mean the situation remains uncertain.
Strait of Hormuz Tensions Continue
Despite the diplomatic signals from Washington, the security situation around the Strait of Hormuz remains a major concern.
Iran reported that five tankers and a tugboat caught fire in the waterway, while reports from both sides described attacks on vessels in or near the strategic shipping route.
The Strait of Hormuz is particularly important to international energy markets because a significant volume of global oil shipments passes through it. Any prolonged disruption could affect the availability of crude in importing countries and increase transportation costs.
Iraq has also been affected by the disruption. Foreign Minister Fuad Hussein said on Sunday that the country had reached an understanding with the United States to allow Iraqi oil exports through the Strait of Hormuz using a shipping lane near Oman.
Hussein estimated that Iraq’s losses from the war with Iran and the resulting interruptions to oil exports had reached $60 billion.
Global Oil Supply Surplus Adds Pressure
Geopolitical developments are not the only factor weighing on crude prices. Rising production and weaker demand have also raised concerns about a potential global supply surplus.
JPMorgan said in a report on Friday that recovering oil flows from the Middle East, increased production from other countries and subdued demand had pushed global supply above consumption.
The bank estimated that the surplus reached 1.1 million barrels per day in September and could widen to 1.4 million barrels per day in October.
A growing surplus generally puts downward pressure on oil prices because it indicates that more crude is available than the market needs. If demand remains weak while production continues to increase, prices could face further pressure even if geopolitical risks persist.
This combination of improving supply expectations and uncertainty over Middle Eastern exports has created competing forces in the market.
Houthi Claim Adds to Regional Security Concerns
Regional tensions also continued after Yemen’s Houthi movement claimed responsibility for an attack on Saudi Aramco’s offices in Riyadh on Sunday.
The incident reportedly damaged windows, although no casualties were reported. The claim added another security concern for energy markets already monitoring developments around the Strait of Hormuz.
Saudi Arabia is a major oil producer, making attacks involving its energy infrastructure particularly important to international markets. However, the reported incident did not establish that Saudi oil production or exports had been disrupted.
What Could Happen to Oil Prices Next?
The direction of crude prices will depend on several developments, including progress in US-Iran negotiations, the security of shipping routes and the balance between global oil production and consumption.
Trump’s comments have eased some fears of immediate military escalation, while the supply surplus is adding pressure to the market. However, continued attacks on vessels and regional infrastructure could quickly change investor expectations.
The fact that oil prices fall despite ongoing security concerns highlights how strongly markets are responding to diplomatic signals and supply forecasts. Traders will continue watching the Strait of Hormuz and negotiations between Washington and Tehran for signs of whether the recent decline can continue.
