Oil prices fell sharply after US President Donald Trump announced the cancellation of a massive strike against Iran and announced a new round of US-Iran negotiations. During trading on August 3, October futures on the benchmark Brent crude collapsed by 7.3% to $81.55 per barrel. Another factor behind the price decline was a further small increase in production quotas by the leading OPEC+ participants, writes Bloomberg.
What Trump said
Trump said that a new round of talks with Iran would begin in the second half of the day on August 3. He explained that over the weekend he agreed to call off a strike on Iranian sites because Saudi Arabia and other U.S. allies in the Middle East urged him to try to reach an agreement with Tehran. “This would be the biggest attack since World War II. Let’s just see if we can make a deal,” the U.S. leader told journalists aboard Air Force One, adding: “I don’t want to kill people” (quote via Bloomberg).
According to Trump, an agreement to resume shipping through the Strait of Hormuz could already be close. At the same time, the president emphasized that he will continue seeking an end to Iran’s nuclear program, Bloomberg reports.
What does this mean for stocks?
Sharp swings in markets on August 3 began after several days of heightened tensions in the Middle East, Bloomberg notes. On Friday evening, the U.S. warned it would strike Iran “very harshly” to end a conflict that has already been going on for the sixth month. Reduced supplies due to the war drove up fuel prices, heightened fears of another inflation surge, and unsettled investors.
“If there’s clarity on a peace agreement—or, even more importantly, on reopening the Strait of Hormuz—then a broad-based rally could start on the back of easing sentiment,” said AT Global Markets’ chief analyst Nick Twidale. “So far, however, it seems volatility across different markets will persist, especially since investors’ bets on AI-linked stocks remain the main story in the stock market.”ㅤ