Oil prices tumbled in early Asian trade on Tuesday after surging to their highest levels since 2022 a day earlier. The drop was driven by comments from Trump that suggested the war with Iran may soon end, easing concerns about prolonged disruptions to global crude supplies.
At the time of writing, Brent crude was trading at $89.31 per barrel, down 9.75%, while West Texas Intermediate had fallen to $85.90, down 9.36% on the session.
In a CBS News interview, Trump said the war was “very complete, pretty much” and that the United States was “very far ahead” of his earlier estimate of a four- to five-week timeline for the campaign.
Trump later told reporters that the war would end “very soon,” though he indicated it would not conclude within the coming week.
Those remarks triggered a sell-off in energy markets as traders reassessed the risk of sustained supply disruptions in the Middle East.
Oil had surged well above $100 per barrel on Monday, falling just short of $120 as conflict across the Middle East escalated and Tehran announced Ayatollah Mojtaba Khamenei as its new supreme leader.
Adding to the downward pressure, Russian President Vladimir Putin held a call with Trump and presented proposals aimed at quickly ending the conflict, according to a Kremlin aide.
Separately, G7 finance ministers said the group “stands ready” to take action if necessary to stabilize oil markets, though they stopped short of announcing a coordinated release of strategic petroleum reserves.
Despite the sharp pullback, crude markets are likely to remain volatile as plenty of geopolitical risk remains, chiefly the fact that it is unclear how Iran will react if there were a cessation of attacks from the U.S.
“Taking the events of the past 24 hours into account, I expect crude oil to remain highly volatile, trading within a wide range between $75ish and $105ish in the sessions ahead,” IG market analyst Tony Sycamore said in a note reported by Reuters.
Meanwhile, disruptions in Gulf production continue to weigh on the outlook. Iraq has cut output at its main southern oilfields by 70% to about 1.3 million barrels per day, while Kuwait Petroleum Corporation has begun reducing production and declared force majeure. Saudi Arabia has also started trimming output.
Iran signaled it could escalate further if attacks continue. The Islamic Revolutionary Guard Corps said Tehran would “determine the end of the war” and warned that Iran would not allow “one litre of oil” to be exported from the region if U.S. and Israeli strikes persisted.
Lower oil prices provided relief for broader financial markets. Chinese assets rallied in early Tuesday trading as energy costs fell. China sourced roughly 13% of its oil imports from Iran before the conflict, making oil price swings particularly consequential for the country’s markets.
For now, traders are going to have to wait and see whether geopolitical tensions escalate again or whether diplomatic efforts gain traction.
By Josh Owens for Oilprice.com
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