Oil fell by nearly 2% on Tuesday after U.S. President Donald Trump said he had paused a planned attack on Iran to allow for negotiations to end the war in the Middle East.
Trump posted on social media on Monday that he was holding off on a planned military attack on Iran scheduled for Tuesday, while efforts continue to reach a deal, adding that the United States was ready to resume attacking if one is not reached.
Brent futures LCOc1 for July were down $2.02, or 1.8%, to $110.08 a barrel at 0802 GMT, while U.S. West Texas Intermediate crude CLc1 for June delivery, which expires on Tuesday, was down 47 cents, or 0.40%, to $108.19. The more active July contract CLc2 fell $1.15, or 1.1%, to $103.23.
"While Trump's signal has eased some immediate pressure, the fundamental risks persist .... The market is now watching whether Trump's comments represent a genuine shift toward de-escalation or just a tactical pause," said Tim Waterer, chief market analyst at KCM Trade.
In the previous session, Brent and WTI hit their highest levels since May 5 and April 30, respectively.
The Middle East conflict has effectively closed the Strait of Hormuz, a critical waterway that typically carries about a fifth of the global supplies of oil and liquefied natural gas, creating the world's biggest oil supply disruption, according to the International Energy Agency.
Tehran's latest peace proposal to the U.S. involves ending hostilities on all fronts including Lebanon, the exit of U.S. forces from areas close to Iran, and reparations for destruction caused by the war, state media reported on Tuesday.
Separately, U.S. Treasury Secretary Scott Bessent extended a sanctions waiver by 30 days to allow "energy-vulnerable" countries to continue purchasing Russian seaborne oil.
In the U.S., a record 9.9 million barrels were drawn from the Strategic Petroleum Reserve last week, Energy Department data showed, bringing stockpiles down to about 374 million barrels, the lowest point since July 2024.
U.S. crude inventories are expected to fall about 3.4 million barrels in the week to May 15 in weekly data from the Energy Information Administration due out on Wednesday. EIA/S
(Reuters - Additional reporting by Anmol Choubey, Trixie Yap and Pooja Menon. Editing by Mark Potter)