Oil prices tumbled sharply on Monday as Iran signaled it was seriously weighing a new US proposal to end the war, raising the prospect of a diplomatic resolution that could bring Iranian crude back into global markets.

Brent crude, the international benchmark, fell as much as 12% to $96.75 a barrel in London trading. West Texas Intermediate, the US benchmark, dropped up to 13%. Both moves rank among the steepest single-session declines in recent memory for oil markets.

Why Prices Fell So Fast

Oil markets price in geopolitical risk quickly. When conflict threatens a major producing region, traders bid prices up to reflect potential supply disruptions. The reverse happens just as fast: any credible signal that tensions may ease pushes prices down as that risk premium gets unwound.

Iran is a significant oil producer and has been subject to heavy US sanctions that sharply limit its crude exports. A diplomatic deal, if it led to sanctions relief, could allow meaningful volumes of Iranian oil to re-enter global supply. Even the possibility of that outcome is enough to move markets.

What This Means for Markets and Consumers

A 12-13% drop in oil prices, if sustained, feeds through to fuel costs, shipping rates, and inflation broadly. Lower crude prices reduce input costs for airlines, manufacturers, and logistics companies. For consumers, cheaper oil typically translates to lower petrol and diesel prices within weeks, though the pass-through depends on refining margins and local taxes.

For central banks that have been fighting energy-driven inflation, a sustained drop in oil would ease pressure on interest rates. That said, a single session move driven by diplomatic speculation can reverse quickly if talks stall or collapse.

The key question now is whether the US proposal has enough substance to produce a durable agreement. Markets will be watching for any official statements from Tehran or Washington on the status of negotiations, and for whether production-level commitments form part of any deal.