Oil prices tumbled by more than 2% during early Asian trading hours on Tuesday following U.S. President Donald Trump’s announcement of a temporary halt on a scheduled military strike against Iran to facilitate peace negotiations. By 0001 GMT, Brent futures for July delivery dropped $3.01, or 2.7%, to $109.09 per barrel, while U.S. West Texas Intermediate (WTI) crude for June delivery fell $1.38, or 1.3%, to $107.28. The slide comes immediately after both benchmarks hit multi-week highs in the prior session, and the more active July WTI contract dropped 2% to $102.32 ahead of the June contract’s Tuesday expiration. Trump expressed optimism on Monday, stating there was a strong probability of securing an agreement to block Tehran’s nuclear ambitions.
Despite the immediate price relief, market analysts remain cautious. Tim Waterer, chief market analyst at KCM Trade, noted that while the announcement cooled immediate market anxieties, underlying geopolitical risks remain heavily entrenched. He emphasized that traders are closely monitoring whether this signals a true path toward de-escalation or merely a strategic pause, alongside keeping a sharp eye on tangible tanker movements through the Strait of Hormuz. The strategic shipping lane, which handles roughly 20% of the world’s petroleum supply, has been effectively choked off by the Middle East conflict, stoking deep structural fears of prolonged energy shortages.
On the diplomatic front, details regarding a potential breakthrough remain fluid. Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed that Tehran’s terms were delivered to Washington via Pakistani intermediaries, and a Pakistani official acknowledged relaying a fresh proposal despite sluggish negotiating progress. Conflicting reports also emerged over potential economic concessions; Iran’s semi-official Tasnim news agency claimed Washington agreed to lift sanctions on Iranian oil exports for the duration of the talks, a rumor a U.S. official swiftly denied. Concurrently, U.S. Treasury Secretary Scott Bessent extended a separate sanctions waiver by 30 days to assist energy-vulnerable nations importing Russian seaborne crude.
The temporary diplomatic pause occurs against a backdrop of severely depleted global oil reserves. Data from the U.S. Energy Department revealed a historic 9.9 million barrel drawdown from the Strategic Petroleum Reserve last week, plunging stockpiles to their lowest levels since July 2024 at 374 million barrels. Sounding a warning on global energy security, International Energy Agency head Fatih Birol highlighted that commercial oil inventories are depleting at a rapid pace, leaving just a few weeks of available supply due to the compounding impacts of the conflict and widespread ocean shipping bottlenecks.
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