Oil prices fell 4% on Monday as US President Donald Trump said over the weekend Iran was “seriously talking” with Washington, signalling de-escalation with an OPEC member after risks of a military strike drove prices to multi-month highs.
Brent crude futures were down $2.81, or 4.1%, to $66.51 per barrel at 0325 GMT.
US West Texas Intermediate crude fell $2.70, or 4.1%, to $62.51 per barrel.
Both contracts dropped sharply from the previous sessions, when Brent touched a six-month high and WTI was hovering near its highest since late September on mounting tensions between the United States and Iran.
Trump has repeatedly threatened Iran with intervention if it does not agree to a nuclear deal or continues killing protesters.
The persistent threats have underpinned oil prices throughout January, said Priyanka Sachdeva, an analyst at Phillip Nova.
“The recent pullback has also been reinforced by renewed strength in the US dollar, which typically makes dollar-denominated oil more expensive for non-US buyers, further weighing on prices,” Sachdeva said.
On Saturday Trump told reporters Iran was “seriously talking,” hours after Tehran’s top security official Ali Larijani said arrangements for negotiations were underway.
Trump’s comments, along with reports that the naval forces of Iran’s Revolutionary Guards have no plans to carry out live-fire exercises in the Strait of Hormuz, are signs of de-escalation, said IG market analyst Tony Sycamore.
“The crude oil market is interpreting this as an encouraging step back from confrontation, easing the geopolitical risk premium built into the price during last week’s rally and prompting a bout of profit-taking,” he said.
OPEC+ agreed to keep its oil output unchanged for March at a meeting on Sunday. In November they froze further planned increases for January through March 2026 because of seasonally weaker consumption.
“Geopolitical risks mask a fundamentally bearish oil market,” Capital Economics said in a January 30 note.
“The historical example of last year’s 12-day war (between Israel and Iran), and a well-supplied oil market, will still bear down on Brent crude prices by end-2026.”
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