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The crude oil price dropped about 5% on Monday as Brent slid to roughly $93 a barrel, its lowest since late August, after Trump said new strikes on Iran are unlikely.
- Brent fell about 5% to roughly $93 on Monday, its lowest level since late August.
- Brent lost 16% last week, its biggest weekly drop since the start of COVID.
- Trump said fresh Iran strikes are highly unlikely while peace talks progress.
Lead
Brent crude futures fell about 5% on Monday to roughly $93 a barrel, extending a historic sell-off, after US President Donald Trump said he was highly unlikely to order new attacks on Iran as long as negotiations to end the conflict continue. The benchmark has now retreated about 22% from the six-month high of $118 reached on October 30. Brent shed 16% last week, the steepest weekly decline since the pandemic-era collapse of 2020. Futures extended losses in post-settlement trade, falling more than $7 a barrel from the previous close at the session's lowest point.
What Happened to Oil Prices on Monday?
Brent dropped about 5% to its lowest since late August after Trump downplayed the need for military action against Iran "at this point." The remarks removed a risk premium that had built up through October, when traders priced in the chance of a sharp escalation after the US midterm elections.
The move came despite continued friction at sea. Both Washington and Tehran reported that shipping had been hit in or near the Strait of Hormuz, the passage that carries roughly a fifth of global oil consumption. Even so, the market treated the political signal as more important than the incidents, trading on the prospect of a negotiated settlement rather than on confirmed progress at the table.
Why Did Crude Fall So Sharply Last Week?
Brent's 16% weekly decline reflected a mix of diplomacy and supply. Hopes for a breakthrough in talks to end the US war in Iran have grown since the Democratic sweep of the midterm elections, which increased pressure on the administration to find an off-ramp. That shift lowered the odds of renewed strikes, which had been the main driver of the rally toward $118.
Physical fundamentals also turned against prices. JPMorgan (JPM) estimated the global oil surplus at around 1.4 million barrels per day in October. OPEC output rose by 1.38 million barrels per day last month to 22.87 million barrels per day. A market adding barrels while the threat to Gulf supply recedes has little to support elevated prices.
Geopolitical Dimension
The oil market has traded as a real-time gauge of the Iran conflict since the war disrupted flows through Hormuz earlier this year, producing one of the largest weekly price surges on record. The reversal now under way shows how much of the earlier price level reflected perceived risk to shipping lanes rather than lost production.
For consuming economies, the decline eases pressure on fuel costs and inflation. For producers in the Gulf and for US shale operators, a Brent price in the low $90s is still historically elevated, but the speed of the drop narrows margins relative to the October peak. Shipping insurers and tanker operators remain exposed to any renewed attacks near Hormuz, which would reprice risk quickly.
What Comes Next for Oil Prices?
Brent is likely to stay sensitive to headlines on the Iran talks and to any further incidents in the Strait. The prevailing market view is that prices are unlikely to fall below $90 without more durable signs of de-escalation and a US-Iran agreement. Without such an agreement, the market remains vulnerable to a rebound if talks stall or strikes resume.
Supply provides a second variable. If OPEC output keeps rising and the surplus persists, the floor under prices weakens even without a diplomatic breakthrough. A confirmed deal that reopens normal shipping through Hormuz would add downward pressure, while a breakdown in negotiations would return the risk premium that traders have just stripped out.
Outlook
Brent's fall to about $93 completes a 22% retreat from the October 30 high and marks the sharpest weekly slide since 2020. Trump's signal of restraint and a visible oil surplus drove the move. The next leg depends on whether peace talks produce a verifiable settlement and whether shipping around Hormuz remains secure.
Mentioned tickers: JPM
