International oil prices dropped sharply in early Asian trading on Monday, while US stock index futures moved higher. This follows President Trump's announcement that the US and Iran will resume negotiations on Monday, boosting expectations for a reopening of the Strait of Hormuz.
According to CCTV News, on August 2, President Trump commented on Iran, stating that an agreement has been reached regarding the Strait of Hormuz and that an agreement on denuclearization will also be secured. Trump said the US will hold talks with Iran on the 3rd. Trump previously indicated that, following advice from Middle Eastern allies like Saudi Arabia, he has decided to abandon a large-scale military strike on Iran and instead seek a negotiated solution.
The Brent crude oil October futures contract fell by as much as 7.3% to $81.55 per barrel, marking one of its largest single-day declines recently. Concurrently, S&P 500 futures rose 0.4%, and Nasdaq 100 futures gained 0.76%.
Japanese and South Korean stock markets opened lower. The Nikkei 225 opened 1% lower, while the Seoul Composite Index in South Korea fell 3.6% at the open, with the index at one point losing over 4% during the session.
Where the easing begins
This easing of tensions provides breathing room for global markets, which had experienced significant volatility. Over the past week, markets were hit by a double blow of concerns over AI trading prospects and renewed inflation fears, putting pressure on both stocks and bonds. Kyle Rodda, a senior analyst at Capital.com, wrote in a client note: "The only drag on the market last week was the escalating geopolitical risk."
Oil under pressure from talks and OPEC+ output
The decline in oil prices is driven by two main factors. First, the news of resuming US-Iran talks directly boosted the expectation of reopening the Strait of Hormuz. Second, key members of OPEC+ have again slightly raised their production quotas, further increasing supply-side pressure.
WTI crude oil futures fell 4.5% to $80.78 per barrel. Iranian Foreign Minister Abbas Araghchi stated on Telegram on Sunday that negotiations between Iran and Oman have entered their final stages, with discussions underway on a new transit route for the Strait of Hormuz. However, Iranian Foreign Ministry spokesman Esmail Baghaei added in an interview with Iranian state television that these talks do not involve the opening or closing of the strait.
Trump told reporters on Air Force One on Sunday: "That would be the largest strike since World War II. We're just trying to see if we can get a deal now." He also said he would continue to push forward the process of ending Iran's nuclear program.
Previously, the approximately six-month-long US-Iran conflict had caused supply tightness, driving up global fuel costs, exacerbating inflation concerns, and causing widespread shocks to stock, bond, and currency markets.
US futures rise as risk appetite recovers
The temporary easing of geopolitical risks has led to a significant improvement in market risk appetite. S&P 500 futures rose 0.4%, and Nasdaq 100 futures gained 0.76%. The risk-sensitive AUD/USD rose 0.3% to 0.7043, leading gains among major currencies.
The Bloomberg Dollar Spot Index fell 0.2%, while the Euro edged up 0.1% to $1.1544. Spot gold rose 0.6% to $4,071.38 per ounce. The cryptocurrency market was mostly stable, with Bitcoin at $63,416.77 and Ethereum at $1,880.23, showing limited moves. Yields on US Treasury bonds fell across the board as the US and Iran prepare to restart negotiations.
Yen's position: market on high alert for joint intervention
Another focus in Asian markets is the yen. The Japanese yen weakened slightly on Monday to 157.66 per dollar, but the market remains highly vigilant about potential further joint US-Japan intervention.
Last week, the US and Japan conducted coordinated intervention in the Tokyo and New York markets, triggering a sharp rebound in the yen. Japan's Ministry of Finance stated that it coordinated intervention with the US Treasury on July 31 US time and said it would not hesitate to take further joint action. Trump told reporters on Sunday that the intervention was a "sign of friendship."
US Treasury Secretary Bessent stated that the US intervened to address "disorderly" yen movements and is prepared to continue assisting Japan. Elias Haddad, global market strategy head at Brown Brothers Harriman, wrote in a client note: "History shows that joint FX intervention is effective, and investors should follow the official direction rather than fight it. Since 1998, three coordinated US foreign exchange interventions have all been successful."
This is a developing story.