By: Economy Middle East

Oil prices plunged by more than 5 percent on Monday after U.S. President Donald Trump refrained from launching a new strike on Iran, opting instead to pursue a swift agreement aimed at curbing Tehran’s nuclear program and reopening the Strait of Hormuz.

As of 5:36 GMT, Brent crude futures fell $4.71, or 5.36 percent, to $83.22 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $5.22, or 6.17 percent, to $79.45 a barrel.

Oil prices fall on signs of easing tensions

Oil prices surged more than 20 percent last month as renewed fighting between the U.S. and Iran, coupled with attacks on several tankers near Oman, intensified security concerns and discouraged some shipping companies from entering the Gulf to load oil.

Signs of easing tensions emerged after Trump said late Saturday on his Truth Social platform that Iran and other regional countries had requested additional time to finalize an agreement that would result in the “immediate, complete and total” reopening of the strategic Strait of Hormuz and eliminate Iran’s nuclear threat.

Two Saudi oil tankers passed through the Bab el-Mandeb Strait into the Red Sea over the weekend, even as traffic through the Strait of Hormuz slowed following reports of vessel attacks, according to shipping data released on Monday.

The United Kingdom Maritime Trade Operations (UKMTO) has reported three additional tanker incidents since Saturday, adding to concerns over security risks in key oil shipping routes.

OPEC+ announces 188,000 bpd output hike

Meanwhile, OPEC+ agreed on Sunday to raise its oil production quota by around 188,000 barrels per day from September, marking the completion of the rollback of one layer of voluntary output cuts.

With the September output increase now approved, OPEC+ will still maintain another layer of production cuts affecting most of its members. These reductions, totaling around 2 million barrels per day, were introduced in 2022 and are scheduled to remain in place through the end of the year.

However, the impact of the group’s production increases has been limited, as export disruptions in the Gulf, along with supply constraints from Russia and Kazakhstan linked to the Iran and Ukraine conflicts, have kept much of this year’s planned OPEC+ output increases largely theoretical rather than translating into higher market supply.