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

Oil prices fell sharply on Monday as President Donald Trump called off planned military strikes on Iran in favor of negotiations aimed at reopening the Strait of Hormuz and addressing Tehran's nuclear program. Brent crude dropped more than 5 percent to trade near 83.50 dollars a barrel after touching a low of 81.55 dollars, while West Texas Intermediate futures declined over 5 percent to around 79.50 dollars a barrel.

The move came after Trump posted on his Truth Social platform late Saturday that Iran and other Middle Eastern countries had requested time to finalize a deal that would deliver the immediate reopening of the strait and an end to Iran's nuclear threat. He indicated talks would begin Monday. The announcement eased some of the geopolitical risk premium that had pushed both benchmarks up more than 20 percent in July following renewed U.S.-Iran fighting and attacks on tankers in the strait.

European equities rose in early trading, with the Stoxx 600 index gaining 0.4 percent. Energy shares fell 2 percent while travel and leisure stocks climbed more than 2 percent. German shares reached an intraday record. U.S. stock futures also pointed higher, with contracts on the S&P 500 up roughly 0.6 percent and Nasdaq-100 futures advancing 0.3 percent ahead of a week that includes key earnings reports and Friday's employment data.

Analysts noted that lower oil prices could ease inflation pressures that had been building in recent weeks. Bond yields, which had risen sharply last week, were expected to face less upward pressure as a result. The drop in energy costs comes as companies with pricing power continue to report resilient earnings, with more than half of S&P 500 firms having already beaten expectations so far this season.

Iran's initial response was measured but skeptical. State media quoted acting defense minister Seyyed Majid Ibn Al-Reza saying every threat would be taken seriously despite the diplomatic language. Iran's Fars news agency, affiliated with the Revolutionary Guard, described Trump's demands as a wish list. Markets appeared to price in at least a temporary reduction in escalation risk, though traders cautioned that any collapse in talks could quickly reverse the moves.

The episode underscores how quickly sentiment in commodity and equity markets can shift with developments in the Middle East. After months of resumed conflict that began in late February, the possibility of renewed diplomacy offered a brief reprieve for energy consumers and transportation sectors. Attention now turns to whether the planned talks produce concrete steps or simply extend the uncertainty that has kept oil prices elevated since summer.