Oil Prices Drop Sharply as Trump Signals Iran Talks, Easing Supply Shock Concerns

Oil markets sold off sharply on Monday as investors reassessed geopolitical risks following signals of renewed dialogue between the United States and Iran. Brent crude dropped nearly 5% to around $65.9 a barrel, while U.S. West Texas Intermediate slid to about $61.8, reversing gains that had recently pushed prices to six-month highs.

The decline followed comments from President Donald Trump, who said Iran was “seriously talking” with the U.S., hinting at a possible easing in tensions after weeks of heightened rhetoric. His remarks came shortly after Iran’s senior security official Ali Larijani indicated that preparations for negotiations were under way.

Oil prices had surged in recent weeks amid concerns that escalating tensions could lead to U.S. military action against Iran, a major oil producer. Those fears intensified after Washington deployed additional naval forces to the region, stoking speculation of a potential supply shock in the Middle East.

Analysts say the latest price drop reflects growing confidence that diplomacy may take precedence over confrontation. Reports that the two sides have been communicating through intermediaries have raised hopes that tensions could de-escalate rather than spiral into conflict, an outcome that would likely drive oil prices sharply higher.

Political considerations may also be playing a role. With U.S. midterm elections approaching, higher fuel prices remain a sensitive issue for voters, increasing the administration’s incentive to avoid developments that could push crude into the $70–$80 range.

Beyond geopolitics, fundamentals are also weighing on prices. Additional Venezuelan crude has been entering the market, largely from the release of existing offshore and onshore inventories, adding to supply at a time when global production continues to outpace demand.

At the same time, OPEC+ has opted to keep output steady, extending its three-month supply freeze into March. While the group’s restraint is providing some support, analysts note that the combination of easing geopolitical risk and incremental supply is helping cap oil prices for now.