Brent crude plunged 5.1% to $83.44 per barrel early Monday, while West Texas Intermediate fell even harder, down 5.8% to $79.77. The sudden sell-off came after President Donald Trump decided to call off a planned strike against Iran, signaling a potential easing of tensions in the volatile Persian Gulf region. This move was widely seen by traders as reducing the geopolitical risk premium that had been pushing oil prices higher amid fears over supply disruptions.
Meanwhile, the Organisation of the Petroleum Exporting Countries and allies (OPEC+) added to the pressure by approving an output boost of roughly 188,000 barrels per day for September. This increase marks the completion of a phased rollback of voluntary production cuts made earlier in 2023, helping to swell global supply. On top of this, oil flows improved outside the critical Strait of Hormuz. The Caspian Pipeline Consortium resumed oil loading at its Black Sea terminal at the end of July, with tankers returning to single-point moorings, further easing scarcity concerns.
Despite diplomatic optimism, physical shipping data indicates the Strait of Hormuz’s traffic has yet to return to normal levels, maintaining some uncertainty in the market. Analysts monitoring Brent’s technical setup see the current decline as part of a corrective wave, suggesting that any short-term rallies could be met with renewed selling. A key price level to watch sits around $81.55 per barrel; if breached, prices may test lower supports near $77 and $73. While an oversold bounce remains possible, momentum looks weak below $91.
Oil traders responded quickly with sharp selling, reflecting the relief but also caution about the ongoing situation in one of the world’s most critical oil transit chokepoints.
