Oil Plunges 10% After Trump Signals De-escalation of Iran War
Oil prices plunged sharply after US President Donald Trump hinted the Iran conflict may be nearing an end, triggering a swift reversal of a rally fueled by concerns about supply disruptions in the Middle East. The decline comes after global energy markets have been volatile for the past two sessions, with intraday volatility widening amid a tug-of-war between geopolitical risk premiums and expectations of policy intervention.
West Texas Intermediate (WTI) plunged as much as 10% to US$85.02 per barrel, following a highly volatile Monday session—with WTI trading around US$38. Trump said at a press conference in Florida that he plans to lift oil-related sanctions and has requested the US Navy escort tankers through the Strait of Hormuz. “We’re trying to keep oil prices low,” Trump said, suggesting the price increase was “artificial” due to the conflict. However, he added that he did not believe the conflict would end this week.
The day before, oil prices surged near US$120 a barrel after major Persian Gulf producers were forced to cut production due to the effective closure of the Strait of Hormuz—a waterway that typically handles about a fifth of global crude oil flows. Prices then rebounded as major economies considered options for releasing emergency reserves, fueling expectations of additional supply amid market concerns.
The conflict, which entered its second week and involved more countries, triggered a broader surge in energy prices, including natural gas and refined products like gasoil. In the US, retail gasoline prices surged to their highest since August 2024, adding to domestic political pressure as energy costs shape inflation expectations.
Trump did not elaborate on the tanker escort plan or the sanctions, other than acknowledging that he had discussed the topic with Russian President Vladimir Putin in a phone call on Monday morning. Last week, the Trump administration also cleared the way for India to temporarily increase purchases of Russian crude, promising a months-long tightening.
The market is now focused on signs of normalizing shipping flows in the Strait of Hormuz. Attacks on several ships since the outbreak of the war have forced many to avoid the route, although a tanker carrying Saudi crude has reportedly passed through in recent days, and Iran continues to ship large volumes through it. On the production side, Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates have reportedly reduced production due to the rapid storage capacity created by the disruption to export flows.
The pressure on crude and product flows from the Middle East has also impacted the downstream side: several refineries have halted operations and shipments, while Asian energy buyers have increased offers to withdraw fuel cargoes originally destined for other regions. In the futures market, Brent's decline from its midday peak to the close was said to be the largest in history, reflecting the fragility of sentiment as the supply narrative changes rapidly.
Market participants will be focusing on two key factors: whether tanker traffic truly recovers in Hormuz (including the implementation of regulations) and whether policy options such as the release of reserves or changes to sanctions are actually implemented. The combination of the two will determine whether the price correction is sustained or volatility remains high as geopolitical risk premiums remain unabated.
Brent crude for May settlement closed 6.8% higher at $98.96 per barrel on Monday after peaking at $119.50 earlier in the session. (alg)
Source: Newsmaker.id
