Crude sold off hard in early Monday trading after President Donald Trump said he had canceled a planned military strike on Iran and that negotiations toward a deal reopening the Strait of Hormuz would begin later in the day.West Texas Intermediate futures for September delivery declined about 4.5% to $80.89 per barrel, while Brent crude futures for October delivery lost roughly 4.4% to $84.10 a barrel. Brent fell as much as 7.3% at one point, touching $81.55 a barrel, and WTI traded as low as $79.77 before steadying.

The reversal follows one of the most violent months on record for energy markets. Both benchmarks climbed more than 20% in July as fighting between the United States and Iran intensified and Houthi militants blockaded Saudi ports, choking off the two main outlets for Middle East crude.

Trump announced the pause Saturday on Truth Social, saying he had been asked by Iran and other governments in the region to hold off while terms were worked out. He said the framework would include the “Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT” along with an end to Iran’s nuclear program. Speaking to reporters aboard Air Force One on Sunday, the president said talks would begin Monday afternoon, without naming a venue or the participants. He declined to set any deadline for reaching an agreement.Trump said he pulled back the operation at the request of Saudi Arabia, the United Arab Emirates, Qatar and Iran, and described a deal covering Hormuz and Iranian denuclearization as imminent.

He characterized the canceled operation as the largest since World War II and said the U.S. remains able to strike at any time.

Tehran offered a far more restrained reading of the weekend. Foreign Ministry spokesman Esmail Baghaei said the strait “will in no way return to the status it was before February 28th,” the date the war began, and said discussions with Oman on shipping through the waterway do not currently include reopening it. Iran’s acting defense minister, Seyyed Majid Ibn Al-Reza, said Tehran treats every threat as real even while viewing recent U.S. statements as pressure tactics. Foreign Minister Abbas Araghchi spent Saturday on calls with counterparts in Pakistan, Turkey and Saudi Arabia warning against renewed American strikes, according to Iranian state media.

The gap between the two accounts explains why traders trimmed risk premium without pricing in peace. A regional official involved in mediation said the proposal calls for reopening Hormuz and halting attacks across the region, including strikes by Iranian-backed militias in Iraq on Gulf states and Jordan, with Washington ending its naval blockade and permitting Iranian oil exports in return. No agreement has been reached.

For American importers, shippers and fuel buyers, the number that matters is what actually moves through the waterway. Hormuz has been effectively impassable since fighting resumed on July 8, weeks after the two sides agreed to a ceasefire. Roughly 20 million barrels a day transited the strait before the war, and traffic recovered enough during the ceasefire to release some 200 million barrels. Transits have since fallen to a trickle, rising only briefly on favorable headlines.

That pattern has defined the market all year: prices retreat on diplomatic signals, then recover the ground within days when tankers fail to sail. Monday’s decline reflects an expectation of barrels returning, not barrels that have returned.

The risk on the water has not eased alongside the rhetoric. The United Kingdom Maritime Trade Operations center received a report of an incident northeast of the region even as the diplomatic track advanced. The State Department has urged Americans to consider leaving the Middle East. War-risk insurance premiums, charter rates and crew availability all remain priced for a conflict zone, and those costs pass through to landed prices for fuel, plastics, fertilizer and packaging long after headlines shift.

Downstream, the arithmetic is straightforward. Every sustained ten-dollar move in crude translates into roughly a quarter per gallon at the pump within several weeks, with diesel typically moving faster and further. Distributors serving the tri-state area have spent the summer buying forward at elevated prices to protect delivery schedules, and a genuine reopening of Hormuz would take months to work through existing contracts.

Goldman Sachs told clients last week that Brent could ease toward $80 a barrel by year-end if the strait fully reopens during the final quarter, while warning that Red Sea disruptions and attacks on Saudi infrastructure remain a source of upward pressure.

Attention now turns to whether Monday’s talks produce anything more durable than the previous rounds. Delegations from the two countries entered negotiations in June built around a memorandum of understanding, and strikes continued throughout. Until tankers move, the market is trading on a promise.

JBizNews Desk | New York

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