Oil prices fell by 2% in early Asian trading on Tuesday after U.S. President Donald Trump announced he had suspended a planned strike on Iran to allow for negotiations to end the war in the Middle East, UNN reports, citing Reuters.
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Brent crude futures for July delivery fell $2.26, or 2%, to $109.84 a barrel by 03:52 GMT (06:52 Kyiv time), while U.S. West Texas Intermediate crude for June delivery fell $1.22, or 1.1%, to $107.44.
In the previous session, the benchmarks reached their highest levels since May 5 and April 30, respectively.
The June WTI contract expires on Tuesday, while the more active July contract fell $1.63, or 1.6%, to $102.75 per barrel.
On Monday, Trump stated there is a "very high probability" of the U.S. reaching a deal with Iran to prevent Tehran from obtaining nuclear weapons, hours after announcing a cessation of hostilities for negotiations.
Trump canceled strike on Iran following allies' request for "serious negotiations"18.05.26, 22:22
"While Trump's signal has somewhat eased immediate pressure, fundamental risks remain… The market is now watching to see if Trump's comments represent a genuine shift toward de-escalation or just a tactical pause," said Tim Waterer, chief market analyst at KCM Trade.
In addition, Iran's reaction to recent events and what is actually happening on the water with tanker movement through the Strait of Hormuz are key factors determining the further movement of oil prices, the publication writes.
The conflict in the Middle East has effectively blocked the Strait of Hormuz, the most important waterway through which about a fifth of the world's oil and liquefied natural gas supplies pass, raising fears of supply disruptions.
Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed on Monday that Tehran's position had been conveyed to the U.S. via Pakistan but provided no further details.
Iran responds to US peace proposal – Tehran demands reparations18.05.26, 17:41
A Pakistani official, speaking on condition of anonymity, stated that Islamabad had conveyed a new proposal between the two sides but emphasized slow progress.
"One would think the oil market would become increasingly indifferent to such headlines," ING said in an analyst note to clients. "However, the scale of supply disruptions is significant and becomes more concerning with each day that oil supplies remain suspended."
Meanwhile, Iran's semi-official Tasnim news agency reported that Washington had agreed to lift sanctions on Tehran's oil exports during the talks, but a U.S. official denied the claim.
Separately, U.S. Treasury Secretary Scott Bessent extended a sanctions waiver for 30 days to allow "energy-vulnerable" countries to continue purchasing Russian oil by sea.
According to the Department of Energy, a record 9.9 million barrels of oil were withdrawn from the U.S. Strategic Petroleum Reserve last week, bringing inventories down to approximately 374 million barrels, the lowest level since July 2024.
Four analysts polled by Reuters estimated on average that U.S. crude inventories fell by about 3.4 million barrels in the week ending May 15.