Brent crude plunges 10% as Trump signals good chance for Iran deal

Brent crude tumbled as much as 10% to $87.60 a barrel Monday after President Donald Trump said there was a "good chance" for a deal with Iran, following a three-day halt in military strikes between the two countries.

"The market is pricing in the possibility that the Strait of Hormuz reopens, which would flood global markets with supply that has been locked out since February," said Helima Croft, head of commodity strategy at RBC Capital Markets.

The international benchmark later pared losses to trade near $90.80 a barrel, still down about 9% on the day. WTI crude fell a similar magnitude. The selloff reversed last week's surge above $100 a barrel — the first time the marker had breached triple digits since 2022 — after Iran effectively closed the Strait of Hormuz to traffic on Feb. 28, choking off about one-fifth of the world's seaborne oil supply. Brent crude for October delivery settled at $85.63 a barrel, down 6.6%.

A resumption of talks raises the prospect of sanctions relief that could return Iranian barrels to global markets, potentially pushing prices lower. The Trump administration faces mounting domestic pressure from elevated gasoline prices, which stood at $4.11 a gallon Monday, according to AAA. The Federal Reserve, which begins a two-day policy meeting Wednesday, now has a 36% probability of a rate hike priced into futures markets, in part reflecting inflation concerns tied to energy costs.

Cross-Asset Ripples

The oil rout rippled across financial markets. The S&P 500 fell 0.2%, while the Dow Jones Industrial Average added 155 points, or 0.3%. The Nasdaq composite declined 0.4%, dragged lower by technology megacaps including Nvidia, which fell 5.1%. The yield on the 10-year Treasury slipped to 4.65% from 4.69% late Friday, as traders pared inflation expectations.

In Asia, the Nikkei 225 ended the session up 0.5%, and Chinese stock indexes rose more than 1%. Chinese memory chipmaker CXMT surged in its Shanghai debut to become the country's most valuable listed company with a market capitalization of 3.3 trillion yuan, or nearly $490 billion.

Airlines and shipping companies — sectors that benefit from lower fuel costs — were among the gainers in US trading, though moves were muted as traders awaited earnings from Microsoft, Amazon and Apple later this week.

What's at Stake in the Talks

US officials told the New York Times on Sunday that Trump had delayed plans to escalate the conflict, motivated in part by dwindling stockpiles of missile interceptors. Iranian officials have portrayed the pause as strategic fatigue, according to CNN. Iran's foreign ministry said there had been movement in negotiations regarding control of the Strait of Hormuz, which has been effectively closed since the US and Israel began strikes on Iran on Feb. 28.

The last time oil prices experienced a comparable geopolitical shock was Russia's invasion of Ukraine in 2022, when Brent briefly touched $130 a barrel. A sustained decline below $85 would provide meaningful relief to consumers and could shift the Fed's inflation calculus, potentially reducing the need for further rate increases. The average US household has seen gasoline costs rise by roughly $50 a month since the conflict began, according to AAA data.

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