Oil prices dropped nearly 2% on Tuesday after U.S. President Donald Trump announced that he had paused plans for military action against Iran to allow more time for negotiations.
Following the opening of Asian markets, global oil prices moved lower as investors reacted positively to signs of possible diplomatic progress in the Middle East.
Brent crude futures fell by around $3 per barrel, trading near $109. Meanwhile, U.S. West Texas Intermediate crude dropped by $1.38 and traded at $107.28 per barrel.
The decline came one day after oil prices climbed to their highest level in two weeks. Markets had previously reacted to growing fears of wider regional conflict and possible disruptions to global energy supplies.
On Monday, Trump said there is a “very good chance” that the United States and Iran could reach an agreement to prevent Tehran from obtaining nuclear weapons. His remarks came only hours after Washington paused military activity to leave room for diplomatic talks.
As a result, investors temporarily reduced some risk premiums that had recently pushed oil prices higher.
Tim Waterer, chief market analyst at KCM Trade, said Trump’s comments eased immediate market pressure. However, he warned that core geopolitical risks remain in place.
According to Waterer, markets are now closely watching whether Trump’s statements represent a genuine shift toward de-escalation or simply a tactical pause.
In addition, traders continue monitoring Iran’s response and developments in the Strait of Hormuz. This strategic waterway handles nearly 20% of global oil supplies, making it critical for energy markets.
Any disruption to tanker movement in the strait could quickly tighten global supply and trigger another rise in oil prices.
Meanwhile, Iranian Foreign Ministry spokesperson Esmail Baghaei confirmed that Tehran had delivered its position to Washington through Pakistan.
However, details remain limited. Pakistani officials reportedly proposed a new framework for talks, although progress appears slow.
Overall, markets remain highly sensitive to both diplomatic developments and regional military risks.
