Oil Prices Dip as Trump Signals De-escalation with Iran, Geopolitical Risk Premium Shrinks

Oil prices experienced a decline on Monday, influenced by U.S. President Donald Trump's downplaying of potential new strikes against Iran. However, concerns over supply disruptions in the Strait of Hormuz persist amid ongoing attacks on vessels.

Brent crude, the global oil benchmark, fell by 1.83 percent to $96.52 a barrel, while West Texas Intermediate, the U.S. crude gauge, was down 1.30 percent at $89.65 a barrel, according to data from 1:23 pm UAE time.

Noureldeen Al Hammoury, head of market insights and community engagement at Equiti Group, noted that oil prices are facing renewed selling pressure as markets increasingly anticipate a diplomatic resolution between Washington and Tehran. "President Trump's indication that further strikes on Iran are unlikely, provided negotiation progress has accelerated the unwinding of the geopolitical risk premium," Al Hammoury stated.

President Trump indicated a reluctance to resume conflict with Iran, especially following his party's defeat in the recent U.S. midterm elections, which has led to calls for de-escalation. He informed CNN that it is "highly unlikely" he would engage in further military action against Iran, provided negotiations concerning Tehran's nuclear program and the reopening of the Strait of Hormuz show progress. "It’s highly unlikely I’ll have to," he said, adding, "They’re withering away financially. We’ve hit them militarily. We could finish them off."

Hopes for a diplomatic breakthrough were further bolstered by the expected meeting between Qatar's Prime Minister, Sheikh Mohammed bin Abdulrahman, and President Trump at the White House on Monday.

These developments occur while attacks on ships in the Strait of Hormuz continue to impede crude oil flows through this critical Arabian Gulf waterway. Prior to the conflict's outbreak on February 28, approximately 20 percent of global oil and liquefied natural gas shipments transited the Strait of Hormuz, underscoring its significance to global energy supply.

On Sunday, Iran's Islamic Revolutionary Guard Corps reported that three oil tankers had exploded and caught fire within the strait after allegedly breaching Iranian regulations and using unauthorized shipping routes.

Al Hammoury projected that Brent crude could face additional downward pressure, potentially reaching the $90–$95 range if a sustained de-escalation scenario unfolds. Conversely, he cautioned that continued attacks on regional infrastructure and uncertainty surrounding the negotiations could rapidly shift market sentiment. "The bigger question is no longer just whether oil supplies will recover, but whether global demand can absorb those additional barrels once they return to the market," he added.

Investors are also closely monitoring Saudi Arabia, following recent attacks by Houthi rebels on the capital Riyadh, including strikes targeting King Khalid International Airport, Aramco oil storage facilities, and the city's financial center. Claims of significant damage from these strikes could potentially impact output from the Organization of the Petroleum Exporting Countries' (Opec) largest oil producer, thereby influencing prices due to supply concerns.