Oil prices dropped about 8% on Monday after U.S. President Donald Trump said he would postpone any military strikes against Iranian power plants for five days and cited constructive talks to resolve hostilities in the Middle East, hours before a deadline that threatened to escalate the four-week-old war. Brent futures fell $8.92, or 8.0%, to $103.27 a barrel, while U.S. West Texas Intermediate lost $7.17, or 7.3%, to $91.06.
The price drop came after Trump issued a 48-hour ultimatum over the weekend demanding Iran fully reopen the Strait of Hormuz or face strikes that would “obliterate” its power plants. That deadline was set to expire Monday evening.
What Did Trump Say About Iran Talks?
Trump said in a post on his Truth Social platform that the U.S. and Iran had had “VERY GOOD AND PRODUCTIVE” conversations over the past two days about a “COMPLETE AND TOTAL RESOLUTION OF HOSTILITIES IN THE MIDDLE EAST.”
He announced that military strikes against Iranian power plants would be postponed for five days, signaling a temporary de-escalation after weeks of intensifying conflict. The announcement sent crude futures plunging nearly 15% earlier in the session.
Did Iran Confirm the Talks?
No. Iran denied it was talking with the U.S. and launched new attacks on Israel and other sites in the Middle East, causing oil prices to pare some of their earlier losses.
Iran’s Revolutionary Guards had said they would attack Israel’s power plants and those supplying U.S. bases across the Gulf region if the United States followed through with Trump’s threat to “obliterate” Iran’s power network. The denial and fresh attacks injected uncertainty back into markets.
What Is the Current Status of the Strait of Hormuz?
The war has already damaged major energy facilities in the Gulf and effectively halted shipping through the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows. Two tankers bound for India sailed through the strait on Monday carrying liquefied petroleum gas loaded in the UAE and Kuwait, although overall traffic through the critical waterway remained blocked.
Analysts have estimated a loss of 7 million to 10 million barrels per day of Middle East oil production.
What Did the IEA Chief Say About the Crisis?
Fatih Birol, executive director of the International Energy Agency, said on Monday that the crisis in the Middle East is worse than the two oil shocks of the 1970s put together. The supply crunch has led to a temporary waiving of U.S. sanctions on Russian and Iranian oil already at sea.
Indian refiners plan to resume buying Iranian oil, while refiners elsewhere in Asia are examining such a move, traders told Reuters.
Will the US Release More Oil Reserves?
U.S. Energy Secretary Chris Wright told CNBC on Monday that the United States is “highly unlikely” to release more oil from its Strategic Petroleum Reserve to calm energy markets during the war with Iran. The SPR has already been tapped as part of a coordinated 400-million-barrel release by IEA member countries.
How Is the War Affecting Global Economies?
Eurozone consumer confidence fell to its lowest level since late 2023 this month, a European Commission survey showed on Monday, offering early evidence of how the war with Iran and surging energy prices may impact the broader economy.
In Russia, the Baltic Sea port of Ust-Luga resumed oil loadings after a drone attack alert was lifted, while neighboring Primorsk remained shut after air strikes, adding to global shortages.
Global air travel remains severely disrupted after the Iran war forced the closure of key Middle Eastern hubs including Dubai, Doha and Abu Dhabi, stranding tens of thousands of passengers.
In China, the government took steps to cushion the impact of rising fuel prices on Monday, increasing the regulated price ceiling for retail gasoline and diesel but limiting the increase to about half what would normally be applied under the government’s pricing mechanism.
What Is the Impact on Central Banks?
Federal Reserve Governor Stephen Miran said on Monday that it is too soon to say what the energy price shock from the Iran war will do to inflation and that he still thinks rate cuts are warranted to support the job market.
The Bank of Japan is laying the groundwork for tweaks to its policy language in April, keeping alive the chance of a near-term increase to interest rates as the weak yen and Middle East conflict pile inflationary pressures on the economy. The Japanese government is considering intervention in crude oil futures as the crisis drives energy prices sharply higher, market sources said.
FAQs: Oil Price Drop and Iran Talks
Q: How much did oil prices drop on Monday?
A: Brent crude fell 8% to $103.27 a barrel. WTI dropped 7.3% to $91.06.
Q: Why did prices drop?
A: Trump announced he would postpone strikes on Iranian power plants for five days and cited “productive” talks with Iran.
Q: Did Iran confirm the talks?
A: No. Iran denied it was talking with the U.S. and launched new attacks on Israel, causing prices to pare some losses.
Q: What is the status of the Strait of Hormuz?
A: It’s effectively blocked to most traffic, with analysts estimating 7 to 10 million barrels per day of lost Middle East oil production.
Q: What did the IEA chief say about the crisis?
A: Fatih Birol said the current crisis is worse than the two oil shocks of the 1970s combined.
Q: Will the US release more oil reserves?
A: Energy Secretary Chris Wright said it is “highly unlikely” the US will release more oil from the Strategic Petroleum Reserve.
Q: How is this affecting global economies?
A: Euro zone consumer confidence fell to its lowest since late 2023. Global air travel remains severely disrupted with key Middle East hubs closed.
Disclaimer: This information is based on inputs from news agency reports. TSG does not independently confirm the information provided by the relevant sources.
