Oil prices tumbled and European equities advanced on Monday after President Donald Trump called off planned strikes on Iran, shifting the focus to negotiations he said would begin the same day.
The price move
Brent crude fell 5 percent to $83.50 a barrel by mid-morning, after touching $81.55, while West Texas Intermediate dropped more than $5 to $79.47. Both benchmarks had surged more than 20 percent in July as fighting between the US and Iran resumed and tanker attacks in the Strait of Hormuz raised the risk premium on Gulf supply.
The diplomatic pivot
Trump said on Truth Social late Saturday that Iran and other Middle Eastern countries had requested time to complete a deal that would reopen the strait and end Iran's nuclear threat, and that talks would start Monday. The reversal unwound part of the geopolitical premium that had driven crude higher, though analysts warned the pattern could repeat.
Market reaction
The pan-European Stoxx 600 rose 0.4 percent in early August trade. Energy shares declined 2 percent while travel and leisure stocks gained 2.1 percent. Kathleen Brooks, research director at XTB, said the oil drop should ease inflation fears and could dampen bond yields, which jumped last week with the 30-year US Treasury yield reaching a 19-year high.
The supply backdrop
OPEC+ agreed Sunday to raise output by about 188,000 barrels a day from September, unwinding cuts. But export disruptions from the Gulf, Russia and Kazakhstan, driven by the Iran and Ukraine conflicts, have blunted the impact of previous increases. Meanwhile the UK Maritime Trade Operations Centre reported three more tanker attacks since Saturday, and shipping data showed Hormuz traffic slowing even as two Saudi-laden tankers transited the Bab el-Mandeb strait over the weekend.
What to watch
Tony Sycamore of IG said the bigger question is whether the week turns into a rinse and repeat of the last one, with Iran digging in and leveraging its control of the strait. The yen separately hit a three-month high after Tokyo and Washington launched a joint operation to support the currency.