Oil Falls Over 5% as Trump Halts Iran Strikes for Hormuz Talks

Oil prices dropped more than 5 percent Monday after President Donald Trump called off planned military strikes on Iran to pursue negotiations aimed at reopening the Strait of Hormuz and addressing Tehran's nuclear program. Brent crude futures fell to $83.50 a barrel while West Texas Intermediate slipped below $80. The moves reversed much of the surge seen in July when renewed U.S.-Iran clashes and tanker attacks raised fears over the vital shipping route.

European stock indexes rose in early trading, with the Stoxx 600 gaining 0.4 percent and Germany's DAX reaching an intraday record. U.S. futures pointed higher as well, with contracts on the S&P 500 up 0.6 percent and Dow futures advancing more than 1 percent. Energy shares lagged while travel and leisure stocks led gains. Analysts noted that lower oil prices could ease pressure on inflation and bond yields that had climbed sharply the prior week.

Trump announced the shift late Saturday on his Truth Social platform, stating that Iran and other Middle Eastern countries had requested time to finalize an agreement that would deliver the immediate and complete reopening of the strait along with an end to Iran's nuclear threat. He added Sunday that talks would begin Monday. The announcement followed reports that another round of strikes had been under consideration amid stalled diplomatic efforts that began after fighting resumed in late February.

Market participants responded quickly to the reduced risk premium. Research director Kathleen Brooks at XTB said the decline in oil should support broader markets by tempering inflation concerns. Similar views came from analysts at IG, who highlighted the potential for steadier energy costs to benefit households and businesses that had faced higher prices during the recent spike.

Iran's initial response remained guarded. A state media account quoted the acting defense minister describing the statements as psychological pressure while still treating threats as real. An outlet affiliated with the Islamic Revolutionary Guard Corps called the outlined terms a wish list. Despite the caution, the absence of immediate escalation allowed traders to price in a period of relative calm.

The episode underscores how energy markets react to shifts in geopolitical tension. July's 20 percent rise in benchmark prices reflected concerns over supply disruptions through the strait, which carries a significant share of global oil trade. The reversal Monday showed markets rewarding steps that reduce those risks without prolonged military involvement. Lower prices at the pump and in industrial inputs typically flow through to wider economic activity, a pattern consistent with historical episodes where de-escalation eased cost pressures.

Attention now turns to whether the planned talks produce concrete results on shipping access and nuclear limits. Corporate earnings season continues this week with several major reports due, and Friday's employment data will provide a fresh read on labor market conditions. Investors will watch both the diplomatic track and incoming economic figures to gauge whether the Monday relief extends into sustained stability.