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WTI drops after US and Iran de-escalation hopes

WTI traded near $78.45, down 7.7% on the day, as investors weighed suspended strike plans and OPEC+ output quota increases from September.

Reported · Written up by our desk · Energy

WTI oil fell sharply on Monday, trading around $78.45 and down 7.7% for the day, as traders unwound the geopolitical risk premium after news of potential US-Iran de-escalation, according to FXStreet.

FXStreet reports that US President Donald Trump said a large-scale military strike against Iran was suspended after Tehran agreed to a framework deal covering its nuclear program and the reopening of the Strait of Hormuz, with US-Iran talks set to begin Monday afternoon. Iran’s Foreign Ministry took a more cautious stance, with spokesperson Esmail Baghaei saying Tehran was not in discussions with the United States regarding reopening the Strait of Hormuz, while talks with Oman on the issue are ongoing.

Adding to the downward pressure, FXStreet said OPEC+ agreed Sunday to increase production quotas by around 188,000 barrels per day from September, completing the unwinding of voluntary output cuts put in place in 2023.

FXStreet also cited TD Securities and BNY as noting that, despite renewed deal hopes, market flows remain constrained and physical supply may still be tight. Analysts referenced that flows through Hormuz have been about 3.0 million to 4.5 million barrels per day over the last two weeks, and that any agreement would need to translate into consistent tanker traffic to materially change the supply outlook.

Latest closeWTI crude $86.80 ▲3.8%

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