Brent crude, the benchmark for about two-thirds of internationally traded oil, dropped more than 7 per cent during early trading before trimming its losses. It was down 5.09 per cent at $83.51 a barrel at 7.27am UAE time. West Texas Intermediate, which tracks US crude, fell 5.67 per cent to $79.87 a barrel.
The decline followed US President Donald Trump’s announcement that another round of negotiations with Iran would begin on Monday. Trump said he had halted plans for further military strikes while diplomatic efforts continued over the strategic waterway and Tehran’s nuclear programme.
Oil markets interpreted the announcement as a signal that the immediate risk of a wider military confrontation had diminished. Prices had risen strongly in July as attacks on vessels, warnings to commercial ships and interruptions to tanker movements intensified concerns about supplies from Gulf producers.
Brent gained about 24 per cent during July, while WTI advanced roughly 21 per cent. Brent ended Friday at $90.12 a barrel and WTI closed at $84.67, reflecting a substantial geopolitical premium linked to the conflict and uncertainty surrounding shipping routes.
The Strait of Hormuz remains central to the outlook. The narrow passage between Iran and Oman carries roughly a fifth of global oil and gas trade under normal conditions. Saudi Arabia, the UAE, Kuwait, Iraq and Qatar depend heavily on the route to reach customers in Asia and other markets.
Commercial traffic through the strait has remained far below normal levels following attacks on vessels and warnings that safe passage could not be guaranteed. Some tankers have delayed journeys, changed routes or remained anchored while shipowners assessed security, insurance and crew risks.
Iran has also been negotiating separately with Oman over arrangements for managing vessel movements. Tehran has said those discussions are in their final stages. The proposals are understood to involve navigation through Iranian and Omani waters while addressing Iran’s demands for greater control over security in the passage.
Oman has played a central mediation role, supported by Gulf governments seeking to protect energy infrastructure and prevent further disruption. Qatar, Saudi Arabia and the UAE have also encouraged dialogue, warning that a wider confrontation could trigger attacks on production facilities, ports and desalination plants across the region.
Uncertainty remains over the scope and format of Monday’s talks. Trump has not disclosed the venue, the participants or whether discussions will be conducted directly or through intermediaries. Iran has also stopped short of confirming that a comprehensive agreement has been reached.
The possibility of renewed military action continues to limit the fall in oil prices. Washington has maintained that strikes could resume if negotiations fail, while Iran’s armed forces remain on alert. Israel has said it retains the option of acting independently if Tehran rebuilds nuclear or missile capabilities that it considers a threat.
Supply expectations added downward pressure to crude prices. OPEC+ agreed on Sunday to increase its collective production target by 188,000 barrels per day in September, completing the restoration of 1.65 million barrels per day of voluntary cuts introduced in 2023.
Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman are among the producers participating in the increase. The alliance has not announced its production policy for the final quarter of the year and is expected to review market conditions at its next meeting on September 6.
The additional output may have only a limited effect while maritime disruptions persist. Several producers have struggled to translate higher quotas into exports because of damaged infrastructure, restricted shipping and conflict-related logistical problems.
An older OPEC+ reduction of about two million barrels per day is scheduled to remain in place until the end of 2026. The group is also reviewing production capacity estimates that will influence national quotas from 2027, a process likely to generate difficult negotiations among members seeking larger market shares.
Traders will now watch for confirmation that vessels are returning to the Strait of Hormuz in meaningful numbers. A sustained recovery in tanker traffic could remove part of the geopolitical premium embedded in crude prices, while another breakdown in negotiations could quickly reverse Monday’s decline.
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