Crude oil tumbles as Trump says Iran war may end soon

Crude oil turns volatile after Middle East conflict and Hormuz disruption, as G7 reserve talk pushes Brent and WTI lower despite supply fears persisting now.

Crude oil prices fell around seven percent in early Asian trade on Tuesday after settling higher the previous day. Rates on Monday climbed on the back of indications of supply disruptions caused by the devastating Israel-U.S. war with Iran and the closure of the Strait of Hormuz, a key supply line that handles around a fifth of the world’s seaborne energy transport. The decline in prices today was triggered by comments from President Trump that the co float will be over soon. The fall was also supported by the Group of Seven (G7) countries’ decision to signal their preparedness to release up to 300 million barrels from their strategic petroleum reserves if crude oil demand and prices escalate, in a bid to ease global supply constraints and cool fuel prices.

In early Asian trade on Tuesday, Brent crude hovered around US$ 92.45 a barrel, sharply lower than the intra-day peak of US$ 119.50 a barrel touched earlier and about 6.6 percent below the previous day’s closing level. Similarly, West Texas Intermediate (WTI) futures slipped below US$ 88.65 a barrel in pre-opening trade, about 6.5 percent lower than the previous day’s settlement.

Despite the later decline, oil prices had settled sharply higher on Monday. Benchmark Brent crude futures for May delivery jumped 6.8 percent, or US$ 6.27 a barrel, to close at US$ 98.96 a barrel, up from US$ 92.69 a barrel in the previous session. West Texas Intermediate (WTI) futures rose 4.3 percent, or US$ 3.87 a barrel, to settle at US$ 94.77 a barrel compared with US$ 90.90 a barrel earlier. For the week, Brent crude surged 27.9 percent, or US$ 20.21 a barrel, while WTI climbed about 36 percent amid escalating geopolitical tensions in the Middle East.

According to an analyst from AnandRathi Investment Services, “Crude oil prices swung sharply on Monday, surging to their highest levels in more than three years before reversing lower by the end of the session. Prices retreated sharply after signals that the conflict may not drag on. U.S. President Donald Trump said the war was ‘very complete’ and progressing faster than expected, while reports also emerged that Russia had proposed a quick settlement plan in talks with the U.S. At the same time, discussions around possible G7 emergency reserve releases and potential easing of Russian oil sanctions helped calm supply fears.”

Monday’s post settlement decline
By the end of the session, Brent fell to around US$ 92–93 a barrel and WTI to about US$ 88–89 a barrel, erasing much of the earlier panic-driven rally. Crude oil had initially spiked on fears that the escalating U.S.–Israel war with Iran over the weekend could severely disrupt global supply, particularly through the Strait of Hormuz. In early trade on Monday, Brent briefly jumped to around US$ 119.50 a barrel and WTI touched about US$ 119.48 a barrel—the highest level since mid-2022—as tensions intensified and some Middle Eastern producers, including Iraq, Kuwait and Saudi Arabia, began cutting output while shipping disruptions mounted.

Market fundamentals, however, turned suddenly bearish after world leaders moved swiftly to ease rising energy prices. Restrictions on tanker traffic have forced several major Middle Eastern producers, including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, to curb output as storage facilities quickly filled due to export bottlenecks. Prior to the escalation in tensions involving Iran, Saudi Arabia had already increased production as part of a contingency plan.

According to surveys, output from members of the Organization of the Petroleum Exporting Countries (OPEC) rose by 530,000 barrels per day in February to 28.87 million barrels per day, with Saudi Arabia alone raising production by 250,000 bpd. Shipping data from global consultancy firm Kpler also showed strong loading activity from Saudi export terminals, suggesting a significant rise in shipments ahead of the recent disruptions.

Trump’s ‘fire and fury’ remarks
Speaking to reporters in Doral, Florida, on Monday, U.S. President Donald Trump said he expects the war with Iran to end “very soon.” He noted that the U.S. and Israel had struck more than 5,000 targets since the conflict began on February 28 following the killing of Iranian Supreme Leader Ayatollah Ali Khamenei. Reports also suggested that Trump held discussions with Russian President Vladimir Putin on the possibility of a “quick settlement” to the conflict. The Republican leader is also reportedly considering a potential U.S. takeover of the Strait of Hormuz, a critical global oil transit route.

Hours later, President Trump threatened to hit Iran “twenty times harder” if it attempts to stop oil tankers in the Strait of Hormuz. A large crowd gathered on the streets of Tehran in support of the country’s new Supreme Leader, Ayatollah Mojtaba Khamenei, after Iran responded to Trump by saying, “It’s not the U.S. that will determine the end of the conflict.” Meanwhile, Iran continued its counterattacks on Israel and U.S. assets in Gulf countries, including Bahrain, Kuwait and Saudi Arabia, damaging infrastructure facilities and defence installations.

Analysts note that Iran’s new Supreme Leader, Ayatollah Mojtaba Khamenei—the son of the late Ayatollah Ali Khamenei—continues to enjoy strong backing from the country’s hardline establishments and several representative associations in Islamic countries. As many as 70 Islamic associations across the world have extended support to the new Supreme Leader in Iran.

G7 oil release
The Group of Seven (G7) nations—Canada, France, Germany, Italy, Japan, the United Kingdom and the United States—have signalled their readiness to deploy emergency petroleum reserves to stabilise global energy markets if the ongoing Middle East conflict significantly disrupts supply. The decision was taken during an emergency meeting of the G7 finance ministers held on Monday, aimed at easing the sharp surge in global energy prices in recent days. Even speculation about such coordinated action was enough to cool the rally slightly, although prices remain significantly higher than pre-conflict levels. Strategic oil stocks held by members of the International Energy Agency (IEA)—which include the G7 economies—currently total around 1.2 billion barrels, maintained as part of a coordinated emergency response mechanism established after the 1973 oil crisis.

Policymakers are considering a potential release of about 300–400 million barrels, equivalent to roughly 25–30 percent of these reserves, should supply disruptions intensify and oil prices spike further. Such a coordinated drawdown, if implemented, would represent one of the largest emergency interventions in oil markets, aimed at cushioning supply shocks and calming price volatility in the event of prolonged disruptions to flows from the Middle East, particularly through the Strait of Hormuz.

Outlook
Crude oil is expected to remain highly volatile as geopolitical developments continue to dominate market sentiment. For WTI, the immediate trading range is seen between US$ 75 a barrel and US$ 105 a barrel, with US$ 105–110 a barrel likely to act as strong resistance if tensions escalate again, while US$ 80–85 a barrel remains key near-term support. Any escalation around the Strait of Hormuz or deeper supply cuts from Middle Eastern producers could quickly push prices back toward the US$ 100 a barrel mark, while diplomatic progress or strategic reserve releases could drag WTI back toward the mid-US$ 70 a barrel to low-US$ 80 a barrel range.

DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com