Oil prices dropped sharply in early Asian trading on Tuesday after Donald Trump announced that the United States had paused a planned military attack on Iran to allow space for renewed negotiations aimed at ending the Middle East conflict.
International benchmark Brent crude futures for July delivery fell $2.26, or 2 percent, to $109.84 a barrel during morning trade. US West Texas Intermediate crude for June delivery slipped $1.22, or 1.1 percent, to $107.44 per barrel.
Despite Tuesday’s decline, oil prices remain near multi-week highs after both contracts surged in recent sessions amid fears of major supply disruptions linked to tensions in the Gulf region.
Trump said on Monday there was a “very good chance” Washington and Tehran could still reach an agreement to prevent Iran from obtaining a nuclear weapon. The remarks came hours after he confirmed that military action against Iran had been postponed at the request of Gulf leaders seeking more time for diplomacy.
Energy traders interpreted the announcement as a temporary easing of geopolitical tensions, though analysts warned that risks to global oil supplies remain significant.
Tim Waterer, chief market analyst at KCM Trade, said investors were now assessing whether Trump’s comments represented a genuine attempt at de-escalation or merely a short-term tactical pause.
Markets remain particularly focused on developments surrounding the Strait of Hormuz, one of the world’s most important energy corridors. About one-fifth of global oil and liquefied natural gas supplies normally pass through the narrow waterway.
The conflict has severely disrupted shipping activity in the area, intensifying fears over supply shortages and higher transport costs.
Iranian Foreign Ministry spokesman Esmaeil Baghaei confirmed that Tehran’s latest position had been conveyed to Washington through Pakistani mediators, although no details were disclosed publicly.
A Pakistani official familiar with the talks said new proposals had been exchanged between the two sides but acknowledged that progress remained slow.
Analysts at ING said oil markets continued to react strongly to political developments because supply interruptions in the region were growing more serious with each passing day.
Additional uncertainty emerged after Iran’s semi-official Tasnim news agency reported that Washington had agreed to suspend sanctions on Iranian oil exports during negotiations. A US official later denied the report.
Meanwhile, the US Treasury extended a waiver allowing certain countries to continue purchasing Russian seaborne oil for another 30 days, citing concerns about energy security.
In the United States, government data showed that 9.9 million barrels were withdrawn from the Strategic Petroleum Reserve last week, reducing stockpiles to their lowest level since July 2024.
Traders are also awaiting fresh inventory figures from the US Energy Information Administration, due later Tuesday, after analysts forecast another decline in American crude stockpiles.
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