Crude oil prices experienced a sharp decline of over 7% on Monday following signals from the U.S. and Iranian presidents that both sides are open to diplomatic negotiations. West Texas Intermediate futures dropped 7.4% to $96.46 per barrel, marking their largest single-day loss since late July, while Brent crude fell 7.6% to settle at $104.77 a barrel. This sell-off comes after oil markets had priced in the possibility of military escalation in the region, which had driven prices up more than 10% during October.

President Donald Trump indicated to reporters that Iran is interested in reaching a deal and expressed hope that an agreement could be achieved. U.S. Secretary of State Marco Rubio emphasized a preference for peaceful resolution rather than military action, pointing out that Trump has refrained from attacking Iran prior to the U.S. midterm elections. On the Iranian side, President Masoud Pezeshkian stated that Tehran aims to solve its issues through dialogue, with backing from Supreme Leader Ayatollah Mojtaba Khamenei, who has authorized government-led diplomatic efforts.

Iran’s foreign minister Abbas Araghchi outlined conditions for an agreement, including the lifting of U.S. sanctions and reducing American military presence in the region to previous levels. He highlighted ongoing discussions around a proposal presented at the United Nations General Assembly in September, signaling a potential breakthrough if the U.S. demonstrates genuine goodwill. Despite these hopeful signs, Iran’s leadership maintains a readiness to respond forcefully if threatened, reflecting the complexity and volatility of the situation.

Market analysts like Ryan McKay from TD Securities noted that the recent price surge largely represented a risk premium tied to fears of conflict escalation. While diplomatic talks have triggered a significant price correction, continued attacks on tankers and disputes in the region are likely to sustain some level of risk premium until a concrete resolution is reached. This dynamic keeps energy markets closely linked to geopolitical developments as they unfold.