Oil plunges as Trump cancels Iran strikes, announces talks

President Trump called off planned military strikes against Iran on Sunday and announced that negotiations would begin Monday afternoon, triggering one of the sharpest single-day oil selloffs of the year. But Iran's foreign ministry publicly denied any direct talks with Washington, exposing a familiar disconnect between the two sides that leaves the conflict's trajectory uncertain.

Oil Markets Shed War Premium

Crude prices fell sharply in Monday's Asian session as traders rushed to unwind the geopolitical risk premium that had built up over weeks of escalation. Brent crude dropped below $84 a barrel, briefly falling as much as 7.3% to $81.55, while WTI slid below $79 with intraday losses exceeding 9%. Both benchmarks had climbed more than 20% in July on supply-disruption fears tied to tensions near the Strait of Hormuz.phemex+2

The selloff was compounded by an OPEC+ decision over the weekend to raise collective production targets by 188,000 barrels per day starting in September, adding supply-side pressure to a market already reeling from the geopolitical shift.tradingkey+1

A Pattern of Threats and Reversals

Speaking aboard Air Force One on Sunday, Trump said he had canceled what he described as a major attack at the request of Saudi Arabia, the UAE, Qatar, and Iran itself. "Now what we're doing is we're talking to them in the form of a negotiation. It begins tomorrow afternoon," he said, without identifying the venue or participants.moneycontrol

The announcement fits a pattern that has defined Trump's approach to the Iran conflict since February — repeated military threats followed by abrupt diplomatic pivots. Moneycontrol documented at least five prior instances in which Trump escalated rhetoric or announced imminent strikes, only to reverse course within hours or days.moneycontrol

Hours after Trump's remarks, Iran's Foreign Ministry spokesman Esmaeil Baqaei directly contradicted the president. "We are not currently negotiating with the United States. Our negotiations are with Oman to secure passage through the Strait of Hormuz," he said. Iran acknowledged it was close to reaching an arrangement with Oman on a new navigation route but emphasized this would not constitute a full reopening of the waterway.profarmer+1

Stakes Beyond the Trading Floor

The oil price drop carries immediate implications for the Federal Reserve's rate calculus. Crude's July rally had been a primary driver of inflation expectations that pushed September rate hike odds toward 60%. With Brent retreating from last week's close above $90, prediction markets showed hike odds easing slightly to around 57.6%.phemex

The talks, if they materialize, operate under a narrowing timeline. A memorandum of understanding signed June 17 opened a 60-day negotiating window expiring around August 16, though Trump has said the deadline is "not hard". Bloomberg reported that Oman and Tehran have been discussing reopening a so-called middle passage through the Strait of Hormuz, though it has been mined by Iran and would need to be cleared before regular use.profarmer+1

Even after Monday's rout, oil prices remain roughly 20% above pre-conflict levels — a reminder that while the war premium has compressed, it has not disappeared.cryptonomist