Brent crude futures fell sharply in early Monday trading as US President Donald Trump announced that new negotiations between the United States and Iran would begin immediately.
The market move reversed a recent rally in energy prices that had been fueled by escalating geopolitical tensions and fears of potential supply disruptions in the Middle East.
The sharp decline in oil prices coincided with a rise in US equity futures, as investors digested the de-escalation signal.
The development marks a significant pivot from the hardening tone previously adopted by the White House, which had vowed to "finish the job" in Iran, reigniting concerns over Strait of Hormuz shipping risks.
That prior rhetoric had pushed Brent crude to $77.30 a barrel, gaining $1.50 since midnight, as markets priced in the risk of renewed conflict.
The announcement of direct talks suggests a diplomatic off-ramp is being pursued, reducing the immediate probability of military action or sanctions that could disrupt global oil flows.
For traders, the shift removes the geopolitical risk premium that had supported energy prices in recent sessions.