Oil prices dropped about 8% on Monday after United States President Donald Trump said he would postpone any military strikes against Iranian power plants for ​five days and cited constructive talks to resolve hostilities in the Middle East, hours before a deadline that threatened to escalate the four-week-old war.

Brent futures fell $8.92, ‌or 8.0%, to $103.27 a barrel at 12:31pm EDT (1631 GMT), while US West Texas Intermediate lost $7.17, or 7.3%, to $91.06.

Extreme price changes in recent weeks — Brent closed at its highest since July 2022 on Friday — boosted both crude benchmarks' historic or actual 30-day futures volatility to the highest levels since April 2022.

Trump said in a post on his Truth Social platform that the US and Iran had had "VERY GOOD AND PRODUCTIVE" conversations ​over the past two days about a "COMPLETE AND TOTAL RESOLUTION OF HOSTILITIES IN THE MIDDLE EAST."

Crude futures plunged almost 15% earlier in the session, but pared losses ​after Iran said it launched new attacks on Israel and other sites in the Middle East and denied it was talking with the US.

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Iran's ⁠Revolutionary Guards had said they would attack Israel's power plants and those supplying US bases across the Gulf region if the US followed through with Trump's threat to "obliterate" ​Iran's power network.

The war has already damaged major energy facilities in the Gulf and effectively halted shipping through the Strait of Hormuz, which handles about 20% of global oil and ​liquefied natural gas flows.

Two tankers bound for India sailed through the Strait of Hormuz on Monday carrying liquefied petroleum gas loaded in the United Arab Emirates and Kuwait, although overall traffic through the critical waterway remained blocked.

Analysts have estimated a loss of 7-10 million barrels per day of Middle East oil production.

The crisis in the Middle East is worse than the two oil shocks of the 1970s put ​together, Fatih Birol, executive director of the International Energy Agency, said on Monday.

The supply crunch has led to a temporary waiver of US sanctions on Russian and Iranian oil ​already at sea. Indian refiners plan to resume buying Iranian oil while refiners elsewhere in Asia are examining such a move, traders told Reuters.

US Energy Secretary Chris Wright told CNBC on Monday that ‌the US is "highly unlikely" to release more oil from its Strategic Petroleum Reserve to calm energy markets during the war with Iran.

Around the world

In Russia, the Baltic Sea port of Ust-Luga resumed oil loadings after a drone attack alert was lifted, industry sources said, while neighbouring Primorsk remained shut after air strikes, adding to global shortages.

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In the US, Federal Reserve Governor Stephen Miran said on Monday that it is too soon to say what the energy price shock from the Iran war will do to inflation and that he still thinks rate cuts are warranted to ​support the job market.

Central banks like the ​Fed use interest rates to control inflation. ⁠Lower interest rates, which reduce consumer borrowing costs, can boost economic growth and oil demand.

The Bank of Japan, meanwhile, is laying the groundwork for tweaks to its policy language in April, keeping alive the chance of a near-term increase to interest rates as the ​weak yen and Middle East conflict pile inflationary pressures on the economy.

The Japanese government is considering intervention in crude oil futures as the ​Middle East crisis drives ⁠energy prices sharply higher, market sources said on Monday.

Euro zone consumer confidence fell to its lowest level since late 2023 this month, a European Commission survey showed on Monday, offering early evidence of how the war with Iran and surging energy prices may impact the broader economy.

Global air travel remains severely disrupted after the Iran war forced the closure of key Middle Eastern ⁠hubs, including ​Dubai, Doha and Abu Dhabi, stranding tens of thousands of passengers.

In China, the government took steps to cushion the impact ​of rising fuel prices on Monday, increasing the regulated price ceiling for retail gasoline and diesel but limiting the increase to about half what would normally be applied under the government's pricing mechanism.