On Monday (August 3), West Texas Intermediate (WTI) crude oil prices fell sharply. The market reacted to rumors of a potential agreement between the US and Iran, prompting investors to liquidate geopolitical risk premiums. As of the latest trading session, Brent crude futures fell approximately 7.33% to around $83.58 per barrel, while WTI crude fell approximately 6.12% to $79.49 per barrel, both marking their largest single-day declines in recent times and hitting three-week lows. US President Trump stated that the US has suspended large-scale military strikes against Iran; this comes after Tehran agreed to a framework agreement covering Iran's nuclear program and the resumption of navigation in the Strait of Hormuz. Trump also revealed that negotiations between the two countries are scheduled to begin Monday afternoon. Markets anticipate a de-escalation of the conflict, reducing the risk of global oil supply disruptions. Trump later further stated on social media: “The Iranian leadership is incredibly two-faced! They’ve asked for meetings, some would even say they’ve begged for them. Talks have begun, and more are scheduled for the coming days. But at the same time, they openly and proudly claim that they haven’t had any discussions, haven’t talked about anything, and have only been in contact with Oman. Then they make their usual claim that the Strait of Hormuz will be under their strong control. In fact, the strait is now completely under the control of the U.S. Navy and our ‘blockade,’ or as some have called it—the ‘American Steel Wall!’ Nothing can get into Iran unless we allow it; nothing can get through unless there is an agreement or a ‘total surrender.’ Whether Iran admits it or not, we are actually discussing how to resolve a problem they’ve created for decades. It’s very simple: Iran will never have nuclear weapons!” Trump added: Whether Iran admits it or not, we are actually discussing a solution to a problem they’ve created for decades; the Strait of Hormuz is controlled by the U.S. Navy; nothing can get into Iran without U.S. approval. However, the Iranian Foreign Ministry was more cautious in its statement. Spokesperson Esmail Bagae stated that Iran is not currently consulting with the United States on the issue of navigation in the Strait of Hormuz, but confirmed that Iran is negotiating with Oman on this issue. Iran continues to deny direct negotiations with the United States. It was reported that Iranian Foreign Minister Araghchi spoke with the Omani Foreign Minister, exchanging views on the latest regional developments; the Iranian Minister of Industry, Mining and Trade arrived in Islamabad to attend the Iran-Pakistan Joint Trade Committee meeting; and the Pakistani Minister of the Interior plans to visit Iran in the next day or two. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) reached a resolution on Sunday to increase production quotas by approximately 188,000 barrels per day starting in September, gradually withdrawing from the voluntary production cuts implemented in 2023. The prospect of increased supply is putting additional downward pressure on oil prices. Regarding shipping, data from maritime analysis firm Wenward shows that six Saudi oil tankers are circumnavigating the Cape of Good Hope to avoid the Red Sea and the Bab el-Mandeb Strait, circumventing the Houthi risks; this empty leg of the journey could add 6 to 7 days to the voyage. The UK Maritime Trade Operations Centre reported multiple tanker attacks since Saturday. Navigation through the Strait of Hormuz remains significantly restricted. According to EIA data, US Strategic Petroleum Reserve crude oil inventories fell by approximately 2.85 million barrels last week to 304.8 million barrels, the lowest level since 1983, highlighting the tight supply situation. Diplomatic easing eased market panic, but crude oil supply bottlenecks persist, causing oil prices to fall. TD Securities analysis noted, "Rising expectations of a potential US-Iran agreement prompted Commodity Trading Advisors (CTAs) to slightly short crude oil." However, the bank believes the market is currently overly pessimistic, and global physical crude oil flows remain significantly constrained. Strategists noted that "the recovery of Middle Eastern oil production has been hampered by recent escalations in the situation, and warned that even if an agreement is reached, given the precedent of negotiations breaking down in recent weeks, it may not be enough to reliably attract a sufficient number of tankers to continue transiting the region." Analysts added that in the past two weeks, crude oil traffic through the Strait of Hormuz (including transshipment in the Gulf of Oman) has remained at 3-4.5 million barrels per day, roughly in line with current oil production levels. This highlights that despite falling oil prices, the spot market supply of crude oil remains tight. (WTI crude oil daily chart source: FX678) BNY Mellon commented: "Diplomatic mediation has created a buffer window, and the US and Iran have resumed communication, most likely through regional intermediaries." The bank reported that Trump canceled the planned strikes because Middle Eastern allies (including Saudi Arabia) proposed a framework for de-escalation, including de-escalation, reopening of the Strait of Hormuz, and the Iranian nuclear issue. Affected by this news, oil prices fell sharply. Israeli Prime Minister Netanyahu stated that Trump's consideration was to avoid a global economic collapse. In terms of prices, benchmark crude oil prices continued to diverge: Brent and WTI both fell sharply, while some Middle Eastern crude oil varieties fluctuated. The market is closely watching whether Trump's statement that "negotiations have begun and more talks will be held in the coming days" will materialize, and whether Iran will soften its public stance.