Oil prices fall as Trump calls off Iran strike, seeks Hormuz deal

Markets react to sudden US policy shift

Oil prices slid sharply on Monday after US President Donald Trump called off a planned attack on Iran, opting instead for a diplomatic push to resolve the standoff over the Strait of Hormuz. The decision, announced over the weekend, caught traders off guard and triggered a rapid sell-off in crude futures.

Brent crude, the international benchmark, fell by more than 4% in early Asian trading, while West Texas Intermediate dropped below the $50-a-barrel mark for the first time in weeks. The reversal came after weeks of rising tensions in the Gulf, where tanker seizures and drone attacks had threatened to choke off one of the world's most vital energy arteries.

From brinkmanship to backchannel talks

According to sources familiar with the matter, the US president had authorised a retaliatory strike against Iranian targets in response to recent provocations. But at the last minute, he pulled back, instructing his national security team to explore a negotiated settlement instead.

Trump's pivot appears aimed at reopening the Strait of Hormuz, through which roughly a fifth of global oil consumption passes daily. The strait has been partially disrupted in recent weeks, with Iranian patrol boats harassing commercial tankers and laying mines in key shipping lanes, according to maritime security reports.

What a deal could look like

Diplomatic sources suggest the US is seeking a phased agreement that would see Iran halt its naval harassment and allow safe passage for oil tankers, in exchange for relief from certain sanctions. Neither side has publicly confirmed the contours of any potential deal, and officials in Tehran have not yet responded to Trump's overture.

Analysts caution that the road to a formal accord remains fraught. Iran has repeatedly demanded an end to all US sanctions and guarantees that its oil exports can resume at pre-sanctions levels. Washington, for its part, insists on verifiable commitments from Tehran before any concessions are made.

Market implications and uncertainty

The immediate market reaction reflects relief that a full-scale military conflict has been averted, at least for now. But traders remain wary of a sudden escalation if talks stall or collapse. "The geopolitical risk premium is still very much alive," one Singapore-based oil broker told TIVRA News. "Prices could swing violently in either direction depending on how the diplomacy plays out."

For India, one of Iran's historic oil customers, the development carries significant weight. New Delhi had been forced to diversify its crude imports after US sanctions cut off Iranian barrels, but a reopening of Hormuz would ease shipping costs and potentially lower domestic fuel prices. Indian refiners are closely monitoring the situation, though no official statement has been issued yet.

What to watch next

All eyes are now on the coming days, when US and Iranian envoys are expected to hold preliminary talks, possibly through an intermediary such as Oman or Qatar. Any sign of progress could push prices further down, while a breakdown in communications would likely send them soaring again.

For now, the oil market is holding its breath, balancing hope for a diplomatic breakthrough against the ever-present risk of miscalculation in one of the world's most volatile regions.