WTI crude falls 1.1% to $81.68 as US-Iran dialogue hopes rise

Oil prices extended their decline as President Donald Trump's claim of US-Iran dialogue raised hopes of a diplomatic resolution to a conflict that had pushed crude above $100 a barrel.

WTI crude futures slid 1.1% to $81.68 a barrel in early Asia-Pacific trading Tuesday after President Donald Trump said the US and Iran were engaged in dialogue, raising the prospect of an end to a conflict that had disrupted flows through the Strait of Hormuz.

"The President is giving talks some space. We remain locked and loaded, but he's going to give negotiations a little bit of room," US Ambassador to the United Nations Mike Waltz told Fox News.

The decline extended Monday's rout, when WTI settled at $82.61, down 7.5%, and Brent crude fell 6.3% to $85.87 a barrel — a sharp reversal from last week when Brent briefly topped $100. The pullback rippled across markets, with the S&P 500 rising less than 0.1% and the 10-year Treasury yield falling to 4.65% from 4.69%.

The lull in fighting — now in its second day — follows nearly two weeks of continuous US airstrikes and Iranian retaliation that closed the Strait of Hormuz to commercial shipping. Before the conflict escalated in late February, Brent traded around $72 a barrel. A sustained diplomatic breakthrough could unlock Iranian crude exports and add supply to a market that had priced in prolonged disruption.

Iran's Foreign Ministry on Monday rejected Trump's assertion that negotiations were underway, saying the country was "not engaged in any negotiations with the United States" and that restarting talks was "not in our DNA," according to Tasnim. The ministry also confirmed the Strait of Hormuz remains completely closed to all lanes, despite the pause in military operations.

The contrasting messages from Washington and Tehran leave the market uncertain whether the current lull will lead to formal engagement or prove temporary. Mediators from Pakistan and Qatar have intensified exchanges between both sides, according to Anadolu Agency, with a joint proposal calling for a return to pre-July 9 positions.

The last time Brent traded above $100 was during the initial weeks of the conflict in late February, when the Strait of Hormuz closure removed an estimated 17 million barrels per day of transit capacity. The subsequent retreat — Brent has now fallen more than 14% from last week's peak — reflects growing conviction that the worst-case supply scenario is receding.

Still, risks remain. Iran's army warned Sunday that the war could widen further if Washington resumed airstrikes. Yemen's Houthis said they had struck Saudi Aramco facilities, and an oil tanker exploded in the Strait of Hormuz after striking a naval mine, according to Iran's Tasnim news agency. The US decision to pause its bombing campaign was also influenced by concerns over dwindling stockpiles of Patriot interceptors and other defensive weapons, the New York Times and CNN reported.

Wall Street now faces a busy week, with the Federal Reserve's policy decision Wednesday and a heavy slate of earnings from Microsoft, Apple and Amazon. The Fed meets with a nearly 36% chance of a rate hike priced in, according to CME FedWatch, as stubborn inflation — exacerbated by earlier energy price spikes — continues to squeeze households. Nationally, a gallon of gasoline costs $4.10, almost a dollar higher than a year ago, according to AAA.

This article is for informational purposes only and does not constitute investment advice.