Oil Falls, Signs Iran Peace Approaching?
Oil prices weakened on Tuesday (May 19) after US President Donald Trump said he was canceling a previously planned strike on Iran on Tuesday, following a request from Persian Gulf allies. This move eased some of the risk premium that had been boosting prices amid uncertainty over negotiations and the effective closure of the Strait of Hormuz.
At 8:23 a.m. Singapore time, the July Brent contract fell 2.4% to US$109.37 per barrel, after surging 2.6% on Monday. The July WTI contract fell 1.8% to US$102.51, while the quieter June contract, which expires on Tuesday, fell 1.3% to US$107.25.
Trump stated in a social media post that the leaders of Saudi Arabia, Qatar, and the United Arab Emirates had asked the US to hold off on the strike because “serious negotiations” were underway. However, Trump emphasized that the US military remained ready to strike if an “acceptable” agreement was not reached, without specifying a deadline. He also said the suspension could be “permanent” or “temporary,” depending on the outcome of the talks.
While news of the delay eased the risk of immediate escalation, the market still faces significant uncertainty. The near-total closure of Hormuz remains a key issue as it could further hamper Gulf energy supplies, while Tehran has not confirmed any new talks. Investors are also watching Trump's repeated threats of military action, but they haven't always followed through, keeping headline volatility high.
On the supply side, a US naval blockade reportedly idled Iran's main export terminal on Kharg Island for at least 10 days, cutting off Iranian oil revenues and removing millions of barrels from the market. This is a reversal from the initial conditions of the war, when Iran became the dominant exporter in the strait after restricting other countries' shipping. Meanwhile, a Tasnim report about a proposed waiver of Iranian oil sanctions briefly caused prices to pare gains on Monday, but a US official, speaking on condition of anonymity, called the report false.
Beyond Iran, the US also issued a new waiver allowing the sale of Russian crude and oil products already loaded on tankers, days after the previous waiver expired. Going forward, the market will monitor whether negotiations are truly moving forward, how the dynamics of the Kharg and Hormuz blockades affect physical flows, and whether US sanctions policy signals change, as these factors will determine whether the oil correction continues or volatility increases again.
5 key points:
- Oil fell after Trump canceled Tuesday's scheduled strikes on Iran.
- Brent July US$109.37 (-2.4%); WTI July US$102.51 (-1.8%) (08:23 Singapore).
- Trump held off on strikes at the request of Saudi-Qatar-UAE, but still prepared strike options if the deal fails.
- The US blockade idled the Kharg terminal for 10 days, stifling Iranian supplies and revenue.
- Ayu from Newsmaker added that although tensions have eased, the risk of conflict escalating remains. The situation remains full of uncertainty, and the risk of escalation remains open and could trigger renewed volatility, especially in oil, the US dollar, and gold. (asd)*
Source: Newsmaker.id
