President Donald Trump called off a planned U.S. military attack on Iran on Monday night, citing appeals from Gulf Arab leaders and “serious negotiations” underway, pushing oil prices sharply lower and briefly rattling the U.S. dollar before it found its footing.
How Gulf Diplomacy Stopped a Scheduled Strike
Trump’s announcement came as regional diplomacy intensified, with Iranian officials rejecting recent U.S. conditions for renewed talks while Washington continued to demand limits on Iran’s nuclear enrichment and missile capabilities.
In a Truth Social post, Trump said the Emir of Qatar, the Saudi crown prince, and the UAE president asked him to “hold off” on an attack scheduled for Tuesday, arguing that talks were progressing and a deal was within reach.
Trump called the pause a “very positive development.” He acknowledged past moments when a deal seemed close but fell through, adding: “But this is a little bit different.”
The olive branch came wrapped in a threat. Trump said he had instructed the U.S. military “to be prepared to go forward with a full, large-scale assault of Iran, on a moment’s notice, in the event that an acceptable Deal is not reached.”
White House deputy press secretary Anna Kelly said on Fox News that “nothing has changed” in regard to Iran.
She said: “The Iranian ability to enrich has been totally decimated by Operation Midnight Hammer.
This enriched uranium that they possess, they can’t keep it. President Trump has been very clear about that. That is one of the red lines in these negotiations.”
What the Strike Pause Did to Oil Prices
Markets moved fast once Trump’s post landed. Oil prices fell more than 2% in early Asian trade on Tuesday.
Brent futures for July delivery dropped $3.01, or 2.7%, to $109.09 a barrel, while the WTI July contract, which is the most actively traded, fell $2.06, or 2%, to $102.32 per barrel.
WTI traded as low as $101.85 during early Asian hours, briefly dipping below $102 before partial stabilization.
Both Brent and WTI had advanced more than 54% since the U.S.-Iran war began on February 28, with energy markets pricing in sustained disruption along the Strait of Hormuz.
The Strait remains mostly closed, and the Trump administration continues to blockade Iranian ports.
About 20% of the world’s crude oil and liquefied natural gas supplies flowed through Hormuz prior to the war.
The IEA has warned that oil inventories are shrinking at a record rate. The agency said global oil inventories will near all-time lows of 7.6 billion barrels by end-May if demand stays flat month over month, according to an estimate from Swiss bank UBS.
How the Dollar and Bond Markets Absorbed the Shock
The dollar steadied early Tuesday after the pause announcement. The yield on the U.S. 10-year Treasury bond fell 3 basis points to 4.591%, retreating after hitting its highest level in a year as inflation fears eased slightly.
The dollar index held at 99.026 in early Asian trade. HSBC global head of forex research Paul Mackel noted: “There are reasons why the dollar has not strengthened back to the levels seen in March.”
Markets are now pricing a 50% chance the Federal Reserve could raise borrowing costs later in 2026.
Chicago Fed President Austan Goolsbee flagged that inflation remains too high, adding weight to that view.
Fed funds futures are pricing an implied 36.2% probability of a 25-basis-point rate hike at the U.S. central bank’s December meeting, compared to a 0.5% chance just a month ago, according to CME Group’s FedWatch tool.
What Comes Next
Trump is scheduled to meet with top national security advisers on Tuesday, May 19, 2026, to assess military options and the state of negotiations. U.S. Senator Lindsey Graham said on Monday that any agreement with Iran must be submitted to Congress for approval, following the precedent set by the JCPOA.
He listed the key conditions: no enrichment, U.S. control of approximately 900 pounds of highly enriched uranium, an open Strait of Hormuz, and an end to Iran’s long-range ballistic missile program.
Iran’s foreign minister said last week that a lack of trust remains the biggest obstacle to any deal. No formal deadline has been set for the next round of talks.
