Oil prices fell more than 2% in early Asian trade after US President Donald Trump announced he had paused a planned attack on Iran to allow negotiations to end the West Asia conflict. According to Reuters, Brent futures for July delivery fell $2.26, or 2%, to $109.84 a barrel at 0352 GMT, while US West Texas Intermediate crude for June delivery fell $1.22, or 1.1%, to $107.44. The June WTI contract expired on Tuesday, with the most active July contract falling $1.63, or 1.6% to $102.75 per barrel. The pullback came after Trump's announcement that there was a 'very good chance' the United States could reach an agreement with Iran to prevent Tehran from obtaining a nuclear weapon, hours after announcing the pause in military action to allow talks. As reported by Reuters, Trump's signal has eased some immediate pressure, but the fundamental risks persist, with markets now watching whether his comments represent a genuine shift toward de-escalation or just a tactical pause. According to ING analysts, "The scale of supply disruptions is significant and growing more concerning each day that oil flows remain halted."
A US naval blockade has significantly impacted Iran's oil infrastructure, leaving Iran's Kharg Island oil terminal idle for at least 10 days. As reported by CNBC TV18, this blockade has cut off Tehran's petroleum revenues and withdrawn millions of barrels from the market. The development represents a dramatic reversal for the Islamic Republic, which had been the strait's dominant crude exporter after barring other nations' vessels from the waterway in the opening weeks of the war. According to NDTV Profit, this marks a significant shift as Iran had initially benefited from elevated prices after restricting other countries' shipping through Hormuz during the early stages of the conflict. The Strait of Hormuz, a critical waterway that carries about a fifth of global oil supply, remains the central concern for markets, as any prolonged disruption threatens a significant portion of global crude and fuel shipments.
Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed on Monday that Tehran's position had been conveyed to the US via Pakistan but provided no further details. A Pakistani source confirmed that Islamabad, which has conveyed messages between the sides in the war in the Middle East since hosting the only round of peace talks last month, had shared the latest proposal with Washington. However, the source suggested progress had been difficult, stating 'We don't have much time' as the sides "keep changing their goalposts." Meanwhile, Iran's semi-official Tasnim news agency reported that Washington had agreed to waive sanctions on Tehran's oil exports during negotiations, though a US official declined to be named dismissed the report as false. According to Reuters, Tim Waterer, chief market analyst at KCM Trade, noted that "The market is now watching whether Trump's comments represent a genuine shift toward de-escalation or just a tactical pause. Also, how Iran responds to the latest developments, and what's actually happening on the water with tanker movements through the Strait of Hormuz are key determinants of where oil prices head to from here."
Iran's peace proposal, as described by a senior Iranian source, appeared similar to previous offers that Trump rejected last week as "garbage." The proposal would focus first on securing an end to the war, reopening the Strait of Hormuz — a major oil supply route that Iran has effectively blockaded — and lifting maritime sanctions. In an apparent softening of Washington's stance, the senior Iranian source said the US had agreed to release a quarter of Iran's frozen funds — totalling tens of billions of dollars — held in foreign banks, though Iran wants all assets released. The US has not confirmed that it has agreed to anything in the talks. The Iranian source also said Washington had shown more flexibility in agreeing to let Iran continue some peaceful nuclear activity under supervision of the International Atomic Energy Agency. Trump's post on calling off an attack came after leaders of Qatar, Saudi Arabia and the United Arab Emirates had requested that he hold off on the attack because "a deal will be made, which will be very acceptable to the United States of America, as well as all countries in the Middle East, and beyond."
Iran remained defiant in statements issued on state media after Trump's announcement, warning the US and its allies against making any further "strategic mistakes or miscalculations" in attacking Iran, while contending the Iranian armed forces were "more prepared and stronger than in the past." Iran's top joint military command, Khatam al-Anbiya, said Iran's armed forces are "ready to pull the trigger" in the event of any renewed US attack, according to Iran's Tasnim news agency. "Any renewed aggression and invasion...will be responded to quickly, decisively, powerfully, and extensively," the commander of Khatam al-Anbiya, Ali Abdollahi, was quoted as saying. Trump's post on calling off an attack came after he had instructed the US military that "we will not be doing the scheduled attack of Iran tomorrow, but have further instructed them to be prepared to go forward with a full, large scale assault of Iran, on a moment's notice, in the event that an acceptable Deal is not reached." A fragile ceasefire is in place after six weeks of war that followed US-Israeli airstrikes on Iran, although drones have been launched from Iraq towards Gulf countries, including Saudi Arabia and Kuwait, apparently by Iran and its allies.
