Crude oil prices fell sharply on Monday as investors reacted to signs of easing tensions between the United States and Iran after President Donald Trump held off on a fresh military attack while pushing for an agreement aimed at resolving the nuclear dispute and reopening the Strait of Hormuz.
Brent crude oil, against which Nigerian crude oil is priced, declined $4.65 or 5.29 percent to $83.28 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped $5.20, or 6.14 percent to $79.47 per barrel.
The sharp retreat reflected a reduction in the geopolitical risk premium that had supported crude prices as traders assessed the possibility that negotiations could ease disruptions to oil shipments from the Middle East.
Oil prices had risen by more than 20 percent in July after renewed fighting between the United States and Iran and attacks on tankers around Oman heightened concerns over the security of energy supplies and discouraged some vessels from entering the Gulf to load crude.
Trump said Iran and other Middle Eastern countries had requested additional time to work towards an agreement that could lead to the full reopening of the Strait of Hormuz and address concerns surrounding Tehran’s nuclear programme.
He subsequently said negotiations with Iran were expected to begin on Monday, although he did not specify a deadline for reaching an agreement.
The Strait of Hormuz remains central to the direction of the global crude market because disruption to the strategic waterway has restricted energy flows from some of the world’s largest oil-producing countries. About 20 percent of global oil and gas shipping has been affected by the closure of the route during the conflict.
Despite the latest diplomatic developments, risks to energy transportation remain elevated. Shipping activity through Hormuz slowed following reports of vessel attacks, while the United Kingdom Maritime Trade Operations reported three additional tanker attacks since Saturday.
Supply expectations also came into focus after the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed to increase production quotas by about 188,000 barrels per day from September.
The September increase completes the phased reversal of a 1.65 million barrels-per-day voluntary production cut introduced in 2023.
However, disruptions affecting exports from the Gulf, Russia and Kazakhstan have meant that several previous increases in production quotas have translated into limited additional supply reaching the international market.
OPEC+ still has another layer of production restrictions amounting to roughly 2 million barrels per day, which is scheduled to remain in place until the end of 2026.
The latest price movement leaves crude significantly below levels reached during the height of the Iran conflict. Brent had climbed as high as $126.41 per barrel on April 30, but subsequently retreated as markets increasingly priced in the possibility of diplomatic progress and improved energy flows.
The direction of oil prices will now depend heavily on whether negotiations between Washington and Tehran produce a sustainable agreement and restore normal traffic through the Strait of Hormuz.
A successful reopening could return additional Middle Eastern barrels to the global market, while renewed hostilities or further attacks on tankers could quickly restore the geopolitical premium that drove crude prices higher in previous months.
