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Oil Prices Drop as Trump Says New Iran Attacks Unlikely
Brent crude falls below $98 while markets assess geopolitical risks and global supply gluts following recent Middle East tensions.
Oil prices fell at Monday's open after U.S. President Donald Trump stated he was highly unlikely to order new attacks on Iran while talks to end the ongoing conflict make progress. This development comes despite reports from both nations regarding attacks on ships in or near the Strait of Hormuz, a critical chokepoint for global energy trade.
Market Reaction and Price Drops
The market assessed the possibility of further U.S. strikes on Iran, leading to significant downward pressure on prices. Brent crude fell 84 cents, or 0.85%, to $97.48 a barrel. Meanwhile, West Texas Intermediate (WTI) dropped 32 cents, or 0.35%, settling at $90.51 per barrel. These declines reversed minor gains made during Friday's settlement.
The weekly performance for Brent crude was particularly notable, falling 17% last week. According to LSEG data dating back to 1988, this marks the steepest weekly drop since the start of the COVID pandemic and represents the largest decline in absolute terms recorded in that period.
Diplomatic Signals and Geopolitical Context
Trump provided context for the market's relief during a phone interview with CNN. "It depends on whether or not they sign a very strong agreement," Trump said, adding that he believes it is highly unlikely further military action will be necessary, more context in Trump Claims Oil Is At 'Pre.
This statement follows hints from last week regarding renewed attacks after the U.S. midterm elections. However, there has been no evidence of large-scale U.S. military operations since then. Iran has previously stated it would respond by striking U.S. and Israeli targets if provoked, keeping regional tensions high despite current diplomatic efforts, a story we covered in Trump Claims Oil Is At 'Pre.
Global Supply Glut Expected
Beyond geopolitical factors, fundamental supply issues are driving oil prices lower. JPMorgan reported in a Friday release that oil is headed for a glut due to recovering Middle Eastern flows, rising production from other countries, and weak demand. The bank estimates a surplus of 1.1 million barrels per day in September, which will widen to 1.4 million bpd in October, as reported by RTVE.
On Sunday, Iraq reached an understanding with the U.S. allowing Iraqi oil exports through the Strait of Hormuz via a shipping lane near Oman, according to Foreign Minister Fuad Hussein. He noted that losses from the Iran war and disruptions to oil exports have already reached $60 billion for Iraq. Separately, the Houthis claimed responsibility for an attack on Saudi Aramco's offices in Riyadh on Sunday, though no casualties were reported.
