Oil prices dropped about 10% to a one-week low on Monday after U.S. President Donald Trump said he would postpone any military strikes against Iranian power plants for five days after constructive talks to resolve the hostilities in the Middle East, hours ahead of a deadline that threatened further escalation in the four-week-old war.

Brent futures fell $11.17, or 10.0%, to $101.02 a barrel at 10:46 a.m. EDT (1546 GMT), while U.S. West Texas Intermediate (WTI) lost $9.28, or 9.5%, to $88.95.

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 close-to-close futures volatility to the highest levels since April 2022.

Trump said in a post on his Truth Social platform that the United States 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.”

Iran’s Revolutionary Guards had said they would attack Israel’s power plants and those supplying U.S. bases across the Gulf region if the United States follows 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 (LPG) loaded in the United Arab Emirates and Kuwait, although overall traffic through the critical waterway remained blocked.

Analysts have estimated a loss of 7 million to 10 million barrels per day (bpd) 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 (IEA), said on Monday.

The supply crunch has led to a temporary waiving of U.S. 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.

U.S. Energy Secretary Chris Wright told CNBC on Monday that the United States 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 neighboring Primorsk remained shut after air strikes, adding to global shortages.

In Libya, the El Feel oilfield has been in shutdown since Thursday after state oil company National Oil Corporation (NOC) used its pipeline to transport crude from the Sharara field after its pipeline was damaged by fire, two El Feel engineers said. Production is expected to resume in a week to 10 days, one of the engineers said.

In the United States, 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 demand for oil.

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.

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.

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(Reporting by Scott DiSavino in New York, Seher Dareen in London, Mohi Narayan in New Delhi and Florence Tan in Singapore; Additional reporting by Dmitry Zhdannikov; Editing by David Goodman and Will Dunham)