Oil prices staged a dramatic retreat on Tuesday, with Brent crude falling nearly 24% from its peak, after Donald Trump signalled that the US-Israel war on Iran could end “very soon,” moving swiftly to calm global energy markets.
The international benchmark had surged to a four-year high of $119.50 per barrel on Monday as fighting in the Middle East intensified fears of a major supply disruption.
However, prices plunged in subsequent trading, dropping as low as $91.58 per barrel after the US president described the conflict as “very complete, pretty much” in an interview with CBS News.
The sharp reversal, which represents a drop of more than $27 from the peak, marks one of the most volatile 24-hour periods for energy markets since the immediate aftermath of Russia’s invasion of Ukraine in 2022.
Trump sought to downplay the earlier surge, claiming prices had risen “probably less than I thought they’d go up,” before taking concrete steps to reassure investors.
In a significant policy shift, the president announced that Washington would temporarily waive some oil-related sanctions to ease potential shortages. The disclosure came shortly after Trump spoke with Russian president Vladimir Putin, raising the possibility that Moscow could be permitted to increase exports.
“We have sanctions on some countries. We’re going to take those sanctions off until the strait is up”, Trump told reporters.
The move follows last week’s decision to permit Indian refiners to purchase Russian oil for 30 days, despite Trump’s earlier claim that New Delhi had agreed to stop buying it as part of efforts to “END THE WAR in Ukraine.”
Despite the market rally, Trump later struck a more hawkish tone, warning on social media: “If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far.”
About one-fifth of the world’s oil and seaborne gas tankers typically pass through the strait, which has effectively been closed for a week. Tehran has hardened its position in response, with Iranian state media quoting a Revolutionary Guards spokesperson declaring that it would not allow “one litre of oil” to be exported from the region while attacks continue.
The French president, Emmanuel Macron, indicated that a coalition of nations could deploy ships to “escort” commercial vessels once “the most intense phase of the conflict” passes, in an effort to secure the vital waterway.
While prices have retreated from Monday’s peaks, they remain significantly elevated compared to just weeks ago, reflecting persistent uncertainty over supplies. The volatility has prompted governments across Europe and Asia to intervene, with Croatia, Hungary, South Korea and Thailand all imposing fuel price caps.
The Philippines has ordered public officials to reduce air conditioning usage and travel, while Bangladesh has closed universities early for the Eid al-Fitr holidays as part of emergency measures to conserve electricity and fuel.
Analysts cautioned that the market remains highly sensitive to developments, with Trump’s conflicting remarks underscoring the fragile nature of any de-escalation.
“The president’s messages have created whiplash,” said one energy strategist. “Investors are relieved by the prospect of an end to hostilities, but the threat of further strikes and Iranian retaliation means the risk premium hasn’t disappeared entirely.”
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