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

US President Donald Trump announced late Saturday that he had called off planned military strikes on Iran after receiving requests from Tehran and other Middle Eastern countries to allow time for negotiations. The move, posted on his Truth Social platform, cited an emerging agreement that would reopen the Strait of Hormuz and address Iran's nuclear program, with talks reportedly set to begin Monday.

Oil markets reacted immediately. Brent crude fell more than 5 percent to around 83.50 dollars a barrel by mid-morning Monday, after touching a low of 81.55 dollars. West Texas Intermediate dropped over 5 percent to near 79.50 dollars. Both benchmarks had surged more than 20 percent in July amid renewed US-Iran fighting that began in late February and attacks on tankers in the Strait of Hormuz.

European stock markets opened higher on the reduced tensions. The pan-European Stoxx 600 index rose 0.4 percent, with travel and leisure shares gaining 2.1 percent while energy stocks declined 2 percent. US futures also pointed upward, with S&P 500 contracts up 0.6 percent and Nasdaq futures gaining 0.4 percent. Analysts noted the price drop could ease inflation pressures and limit further rises in bond yields.

Iran responded cautiously. Acting Defense Minister Seyyed Majid Ibn Al-Reza said every threat would be taken seriously despite what state media described as psychological warfare. Iran's Fars news agency, linked to the Revolutionary Guard, dismissed Trump's conditions as a wish list. The episode follows weeks of heightened risks after tanker attacks revived concerns over global energy supplies.

Market analysts described the shift as a temporary reprieve. Research director Kathleen Brooks at XTB said lower oil prices should support equities by reducing inflation worries. IG analyst Tony Sycamore warned the week could repeat last week's pattern if talks stall and Iran maintains leverage over the strait. European shares have shown resilience, with Germany's DAX hitting an intraday record, though broader uncertainty lingers from the conflict that resumed earlier this year.

The diplomatic pause arrives as investors face a busy week of US economic data and corporate earnings. Manufacturing surveys and Friday's jobs report will offer fresh readings on the labor market. Over half of S&P 500 companies have already reported results, with most beating expectations. Still, the abrupt change in military plans underscores how quickly market sentiment can swing on statements from the White House.

Traders also noted intervention by US and Japanese authorities that lifted the yen to a three-month high. The combination of falling crude and firmer currencies provided relief after July's volatility. Yet questions remain over whether the proposed deal can hold, given Iran's initial dismissal and the history of stalled talks in the region.