Oil prices decline 5% as Trump pauses Iran strike
What's the story
Oil prices witnessed a significant drop in Asia trading on Monday, after US President Donald Trump announced he had called off a planned strike on Iran. The announcement came amid diplomatic efforts to ease tensions in the Middle East. West Texas Intermediate futures for September delivery fell 4.5% to $80.89 per barrel, while Brent crude futures for October delivery declined 4.4% to $84.1 per barrel.
Market reaction
Geopolitical risk premiums reduced
The announcement from Trump had a major impact on the oil market, with investors reducing their geopolitical risk premiums.
"We have just been asked by Iran, and other Middle Eastern Countries, to hold off any attack in that the perimeters of a deal has been agreed to," Trump said in a post on Truth Social.
He also hinted at an agreement that would include opening of the Hormuz Strait and ending Iran's nuclear threat.
Diplomatic stance
Iran's response to Trump's announcement
Iran responded cautiously to Trump's announcement, with acting defense minister Seyyed Majid Ibn Al-Reza saying, "Although the enemy's recent statements are part of a psychological and cognitive warfare campaign, we consider every threat to be real and take it seriously."
However, Fars International news agency, affiliated with the Islamic Revolutionary Guard Corps (IRGC), dismissed Trump's proposal as a "wish list" in a Telegram post on Sunday.