Oil prices fell sharply in early Asian trade on Monday after President Trump called off another round of military strikes on Iran, raising hopes that a diplomatic route to reopening the Strait of Hormuz and averting a broader regional conflict could be found.
At the time of writing, West Texas Intermediate futures were trading at $79.77 per barrel, down 5.88%, while Brent futures had fallen to $83.47, down 5.07%.
The most recent selloff comes after a very volatile July in which both benchmarks surged more than 20% as renewed hostilities between the U.S. and Iran and a blockade of Saudi ports by the Houthis stoked fears of prolonged supply disruptions through the Strait of Hormuz and the Red Sea.
On Saturday, it seemed that disruptions would worsen further when Trump warned that the U.S. was preparing to launch what he described as the "biggest attack since World War II" against Iran. The President then called off that planned attack, saying regional leaders had convinced him that a deal was close.
As has happened so many times since this war started, the prospect of de-escalation saw oil prices tumble when markets opened on Monday. Only time will tell whether this time will be any different or if it is a repeat of previous efforts at diplomacy.
