Oil benchmarks drop over 3% following signs of US diplomatic push with Iran

Global crude benchmarks dropped sharply on Monday following indications that Washington is prioritizing diplomatic engagement over immediate military action against Iran, soothing investor anxieties over potential disruptions to energy supplies.

Both major oil gauges fell by more than 3 percent in early trading. Brent crude declined to around $110 per barrel, while the United States benchmark, West Texas Intermediate, decreased to roughly $100.90 per barrel. The downward movement comes after prices reached six-month highs during the prior week, driven by geopolitical friction and shipping security concerns in the Gulf.

Market sentiment shifted after reports emerged regarding US President Donald Trump's preference for talks. According to reporting from Axios, Trump informed Israeli Prime Minister Benjamin Netanyahu during a phone conversation that he intends to allow diplomatic efforts with Tehran additional time before weighing further strikes, specifically looking past the upcoming US midterm elections.

Speaking to Right Side Broadcasting Network ahead of an Iowa rally, Trump commented on the conflict, telling the outlet that the administration would conclude the standoff soon, stating that Tehran would either agree to an arrangement or the confrontation would end by other means, as reported by CBS News.

Echoing that approach, US Secretary of State Marco Rubio noted over the weekend that Washington had not finalized any plans for additional strikes, emphasizing that the president favors reaching a negotiated resolution. Concurrently, an Iranian delegation traveled to Qatar on Saturday to hold talks alongside regional intermediaries, according to Bloomberg.

The diplomatic push unfolds against a backdrop of persistent maritime instability. On Sunday, the United Kingdom Maritime Trade Operations stated that a vessel was hit by an aerial projectile inside the Strait of Hormuz, following an earlier incident involving a liquefied natural gas carrier on Friday. The maritime security agency also recorded an attack on a ship situated east of Ras Al Khafji, off the coast of Saudi Arabia.

Crude contracts had gained over the previous month, with Brent jumping roughly 15 percent and West Texas Intermediate rising about 12 percent, as traders factored in heightened risk premiums. Even with the early-week drop, market analysts expect supply conditions to stay tight. Swiss financial firm UBS projected that Brent could trade near $110 per barrel through year-end, pointing to regional instability, elevated tanker freight expenses, limited shipping availability, and rising Chinese crude demand as ongoing supports for energy valuations.