Oil prices slide on hints of U.S., Iran diplomacy

February 2, 2026 (MLN): Oil prices fell sharply on Monday, marked the largest market correction in over six months.

The decline came as concerns over a potential supply disruption eased following signals of renewed diplomatic engagement between the United States and Iran, prompting a significant shift in global energy markets.

Brent crude futures went down by $3.30, or 4.76%, to $66.02 per barrel, according to data by Mettis Global.

West Texas Intermediate (WTI) crude futures decreased by $3.28, or 5.03%, to $61.93 per barrel by [12:15 pm] PST.

Crude markets had rallied in recent weeks on fears that escalating tensions between Washington and Tehran could trigger military action and disrupt Middle Eastern oil supplies.

However, sentiment shifted after U.S. President Donald Trump indicated that Iran was engaged in serious discussions with the United States, suggesting a possible reduction in geopolitical risks.

Speaking to reporters over the weekend, Trump said Iran was “seriously talking,” comments that contrasted with his earlier warnings of intervention should Tehran fail to reach a nuclear agreement or continue its domestic crackdown, as reported by CNBC.

Iran, meanwhile, has rejected such accusations, claiming the protests are being fueled by Western influence.

Adding to the easing tone, Iran’s top security official, Ali Larijani, stated on X that preparations for negotiations were underway, reinforcing hopes that diplomacy could replace confrontation.

Oil prices had recently climbed to their highest levels in six months after reports that Washington had deployed a “massive armada” toward Iran, stoking fears of an imminent military conflict.

Monday’s pullback shows a reassessment of those risks.

With U.S. midterm elections approaching, gasoline prices remain a key concern for voters, making oil price stability a critical political issue.

At the same time, additional crude supply is quietly entering global markets, further capping price gains.

Venezuelan oil, largely sourced from offshore and onshore inventories rather than new output, is increasing available supply, even as global production continues to exceed demand.

While extra supply is weighing on prices, support continues to come from OPEC+, which remains cautious in its production strategy.

The oil alliance on Sunday decided to keep output levels unchanged for March, extending a three-month supply freeze.

Lipow noted that while Venezuelan inventory drawdowns are adding barrels to the market, OPEC+’s decision to maintain current production levels continues to provide a floor under oil prices.

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