Oil prices tumbled on Monday as geopolitical tensions in the Middle East showed signs of easing and OPEC+ confirmed it would raise production next month. Brent crude for October delivery dropped 5.16% to $83.39 a barrel, while US West Texas Intermediate futures for September fell nearly 6% to $79.66.
The sell-off followed US President Donald Trump's decision to call off a planned strike on Iran and his announcement that new talks with Tehran would begin later in the day. That reduced the immediate risk of supply disruptions from the Strait of Hormuz, a chokepoint through which roughly a fifth of global oil passes.
Adding to the downward pressure, seven key members of OPEC+ — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman — agreed during an online meeting on Sunday to boost output by 188,000 barrels per day from September. The move, which was widely anticipated by analysts, completes the unwinding of the second of three production-cut packages introduced since late 2022.
Market impact still limited by Hormuz constraints
Despite the headline increase, analysts caution that the actual effect on global supply may be modest in the near term. "OPEC+ has finished unwinding its voluntary cuts. The next challenge is managing the surplus that could emerge as export flows normalise," said Jorge Leon, an analyst at Rystad Energy. He added that the decision "changes little in the near term because Hormuz remains constrained. The real market impact will come when normal export flows resume."
The Gulf countries have struggled to increase exports due to the near-paralysis of the Strait of Hormuz, which Iran has effectively shut during the conflict. A brief uptick in shipping traffic followed a US-Iran memorandum of understanding signed in June, but the strait remains a bottleneck. As European fuel prices have already felt the strain, any sustained recovery in exports will be closely watched by consumers across the continent.
Giovanni Staunovo, an analyst at UBS, noted that many OPEC+ members cannot actually produce as much as their official targets allow due to a "decline in production capacity," making the nominal increase less meaningful than it appears.
What comes next for OPEC+
The September increase completes the restoration of the second tranche of cuts. Rystad Energy's Leon expects a pause in the fourth quarter as the group prepares for the 2027 quota negotiations. "Having completed the restoration campaign, OPEC+ has little incentive to rush into further supply changes," he said. "For now, geopolitics is masking the scale of the supply increase. That will become much clearer once export flows normalise."
It remains uncertain when the group will actually be able to lift volumes. Iraq has expressed interest in significantly boosting production, but Russia faces repeated Ukrainian drone attacks on its oil infrastructure, which have kept output around nine million barrels per day — below its target of 9.8 million. Analysts at DNB Carnegie warn that OPEC+ "faces potentially difficult talks over new production quotas" starting next year.
The broader context is a market that has been shaped by three rounds of production cuts between late 2022 and 2023, which removed nearly six million barrels per day from the market. Since 2025, the group has gradually reversed those cuts, though the UAE's exit from OPEC on May 1 has highlighted internal strains. "I don't think cohesion is at risk at this very moment," said Leon, but he acknowledged that the UAE's departure exposed a weakness.
For European consumers, the immediate relief at the pump may be limited. As Italy's petrol prices have already hit €2.6 per litre, any sustained drop in crude could eventually feed through to lower fuel costs. However, with the Strait of Hormuz still fragile and the possibility of renewed tensions, the outlook remains uncertain. The Bank of England's recent rate hold was partly influenced by these same geopolitical risks, underscoring how deeply the conflict is intertwined with Europe's economic picture.
