Oil prices slipped on Monday after diplomatic talks between the United States and Iran in Switzerland ended with Tehran saying it had secured waivers for oil and petrochemical exports, reducing fears of a major supply disruption in global energy markets.
Brent crude dropped by $1.68, or 2.09%, to $78.89 a barrel in early trading. The benchmark had earlier surged to $82.30 at the start of the session amid heightened volatility triggered by geopolitical tensions, including threats from US President Donald Trump to restart military action against Iran and Tehran’s brief announcement that it had closed the Strait of Hormuz.
US West Texas Intermediate (WTI) crude futures fell 60 cents to $76 a barrel ahead of contract expiry later in the day, while the more actively traded August contract declined by 69 cents to $75.16 a barrel.
Market analysts attributed the decline to easing risk sentiment following signs of progress in negotiations. Sugandha Sachdeva of SS WealthStreet said expectations of a diplomatic breakthrough between Washington and Tehran had revived hopes of future sanctions relief, which would bring more Iranian crude back into global supply.
High-level US and Iranian officials concluded their first round of talks in Switzerland on Monday under a framework agreement aimed at extending a fragile ceasefire by at least 60 days. The deal also includes commitments to reduce hostilities across multiple fronts, including Lebanon.
Iranian Foreign Minister Abbas Araqchi said the negotiations had resulted in waivers for oil and petrochemical exports, alongside the partial release of frozen Iranian assets and the possibility of reconstruction support.
Market experts estimate that such measures could return as much as 1.5 million barrels per day of Iranian crude to international markets, significantly improving global supply conditions at a time of relatively moderate demand growth.
Shipping data showed that vessel traffic through the Strait of Hormuz fell sharply ahead of the talks, following Iran’s announcement that it had closed the waterway due to alleged violations of the ceasefire agreement by Israel and the United States. The move had briefly heightened fears of a wider energy disruption.
Despite diplomatic progress, regional tensions remain elevated. Israeli strikes in Lebanon over the weekend killed at least 20 people, according to Lebanese state media, just days after a ceasefire agreement with Hezbollah took effect.
ING analysts warned that the situation remains fragile, noting that risks of renewed escalation in the region continue to pose uncertainty for energy markets.
Still, crude prices had already fallen more than 8% over the previous week, supported by expectations of increased supply from Iran and other Gulf producers, including Iraq, the United Arab Emirates and Kuwait, which have all signalled higher output.
Over 25 million barrels of Iranian oil have reportedly moved through restricted channels since last week, while Iraq has outlined plans to gradually increase production to between 4.2 million and 4.3 million barrels per day.
The combination of diplomatic progress and rising regional output has eased immediate supply concerns, contributing to Monday’s decline in oil prices.
