Crude oil prices crash 7% on US-Iran peace talks; Brent crude below $84 per barrel

US-Iran war: Oil prices declined after US President Donald Trump announced that fresh talks with Iran would begin on Monday, following his decision to call off a planned military strike against the Islamic Republic.

Brent crude for October delivery fell as much as 7.3% during early Asian trading, after posting its biggest monthly gain since March with a nearly 25% surge in July. Meanwhile, West Texas Intermediate (WTI) crude traded below $81 a barrel.

What's weighing on crude oil prices today?

US President Donald Trump said on Sunday aboard Air Force One that he had cancelled a planned large-scale military strike on Iran after key Middle Eastern allies, including Saudi Arabia, urged Washington to prioritise diplomacy. He added that the attack was called off on the condition that efforts to quickly reach an agreement to reopen the Strait of Hormuz move forward, urging all parties to expedite the negotiations.

Oil markets have remained highly volatile, with Brent crude witnessing sharp price swings of around $32 last month after hostilities resumed following the collapse of a June ceasefire. The conflict expanded to the Red Sea and Jordan before a temporary pause in late July for diplomatic talks eventually broke down.

European natural gas prices also came under pressure, dropping as much as 6.3% during early Asian trading.

Oil prices trimmed part of their losses after the UK Maritime Trade Operations reported that a tanker off the coast of Oman experienced an explosion nearby on Sunday. The incident underscored the continued security risks around the Strait of Hormuz, a key global shipping route that handles nearly one-fifth of the world's crude oil and liquefied natural gas exports during normal conditions. The concerns intensified after an LNG vessel was hit by a projectile late last week.

Meanwhile, Gulf oil producers are exploring alternative export routes. Turkey and Iraq agreed to extend their expired oil pipeline agreement by one year, enabling exports of up to 750,000 barrels per day, according to Iraq's Oil Ministry.

Iranian Foreign Minister Abbas Araghchi said negotiations between Iran and Oman are in their final stages. The two countries, which border the Strait of Hormuz, are discussing a new shipping route through the waterway, although Iranian officials clarified that the talks do not address whether the strait will remain open or be closed.

Separately, major OPEC producers approved another modest increase in production quotas, completing the planned restoration of output cuts introduced in 2023 and positioning the group to raise supply further once tensions in the Middle East ease.

Kazakhstan's Energy Ministry also said the Caspian Pipeline Consortium resumed normal operations from August 1, with oil intake returning to 100,000 tonnes per day following a temporary suspension. While the consortium is allowing tankers to load cargoes, actual export volumes will depend on whether shipping companies consider the route safe enough to operate.

(With inputs from Bloomberg)

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