Summary Oil prices dropped over 2% after Trump paused planned action against Iran for talks, easing supply fears despite ongoing tensions around the Strait of Hormuz
(Reuters) - Oil prices fell more than 2% in early Asian trade on Tuesday after U.S. President Donald Trump said he had paused a planned attack on Iran to allow for negotiations to end the war in the Middle East.
Brent futures for July delivery fell $3.01, or 2.7%, to $109.09 a barrel as of 0001 GMT, while U.S. West Texas Intermediate crude for June delivery fell $1.38, or 1.3%, to $107.28. The two benchmarks had hit their highest levels since May 5 and April 30, respectively, in the previous session.
The June WTI contract expires on Tuesday, while the most active July contract fell $2.06, or 2%, to $102.32 per barrel.
Trump said on Monday there was a "very good chance" the United States could reach an agreement with Iran to prevent Tehran from obtaining a nuclear weapon, hours after announcing the pause in military action to allow talks.
"While Trump's signal has eased some immediate pressure, the fundamental risks persist ... The market is now watching whether Trump's comments represent a genuine shift toward de-escalation or just a tactical pause," said Tim Waterer, chief market analyst at KCM Trade.
"Also, how Iran responds to the latest developments, and what's actually happening on the water with tanker movements through the Strait of Hormuz are key determinants of where oil prices head to from here."
The Middle East conflict has effectively closed the Strait of Hormuz, a critical waterway that carries about a fifth of global oil supply, raising concerns over supply disruptions.
Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed on Monday that Tehran's position had been conveyed to the U.S. via Pakistan but provided no further details.
A Pakistani official, speaking on condition of anonymity, said Islamabad had relayed a new proposal between the two sides but noted slow progress.
Meanwhile, Iran's semi-official Tasnim news agency reported that Washington had agreed to waive sanctions on Tehran’s oil exports during negotiations, but a U.S. official denied the claim.
Separately, U.S. Treasury Secretary Scott Bessent extended a sanctions waiver by 30 days to allow "energy-vulnerable" countries to continue purchasing Russian seaborne oil.
In the U.S., a record 9.9 million barrels were drawn from the Strategic Petroleum Reserve last week, Energy Department data showed, bringing stockpiles down to about 374 million barrels, the lowest since July 2024.
International Energy Agency head Fatih Birol said commercial oil inventories were falling rapidly, with only a few weeks of supply left due to the conflict and disruption to shipping.
