The sell-off ended a run of sharp gains. Brent had surged nearly 25% in July, its biggest monthly jump since March. Fuel costs climbed as the Iran conflict entered its sixth month, stoking fresh inflation worries.
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Prices fell after US President Donald Trump said he had called off a planned large-scale strike on Iran and would instead begin new talks with Tehran on Monday.
Trump said he made the decision after West Asian allies, including Saudi Arabia, urged him to pursue a negotiated deal instead. He added that he agreed to the pullback on condition that officials reach a deal quickly to reopen the Strait of Hormuz and told officials to move fast and get it done.
Bloomberg cited a Telegram post from Iranian Foreign Minister Abbas Araghchi, who said on Sunday, August 2, that talks between Iran and Oman on a new route through the Strait of Hormuz had reached their final stage. His spokesman, Esmail Baghaei, told Iranian state television that the talks did not address whether the strait itself would remain open or closed.
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A modest OPEC+ production increase added further pressure on prices. Key members approved the latest small hike to output quotas, completing the theoretical restoration of supply that had been halted back in 2023.
The move also leaves the group room to add more barrels once the West Asia war ends.
Despite the pullback, risks to shipping through the Strait of Hormuz remain high. Oil pared some of its early losses after the UK Maritime Trade Operations agency reported that a tanker off Oman had detected a nearby explosion on Sunday.
That came days after an LNG tanker was struck by a projectile while transiting Hormuz, a route that normally carries about a fifth of the world’s crude oil and LNG supply.
Brent swung across roughly a $32 range in July as fighting resumed after the truce between the US and Iran collapsed. The conflict later spread to the Red Sea and Jordan, and a fresh pause which was meant to allow diplomacy in late July also broke down.
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Gulf producers, meanwhile, are working on alternative export routes. Turkey and Iraq agreed to extend an expired pipeline deal by a year, allowing exports of up to 750,000 barrels a day.
In Kazakhstan, the Energy Ministry said the Caspian Pipeline Consortium is still moving oil at 100,000 tons a day from August 1, after a brief suspension on Friday July 31.
Tankers will be allowed to load, though actual export volumes will hinge on whether shipping companies are willing to take the risk, following a string of attacks on vessels loading near the Black Sea facility that has already disrupted flows of Kazakh crude.
European natural gas also fell, dropping as much as 6.3% in early Asian trading.
