Trump's De-Escalation Signal, Oil Not Parachuting?
Oil prices fluctuated after the Wall Street Journal reported that US President Donald Trump expressed his willingness to end the military campaign against Iran, even though the Strait of Hormuz, a vital oil shipping route, remains largely closed. West Texas Intermediate (WTI) crude fell to around $103 per barrel after previously surging nearly 4% following an Iranian attack on a tanker in the Persian Gulf. Brent crude was trading around $113.
According to the report, Trump and his aides assessed that reopening the Strait of Hormuz would extend the war beyond Trump's stated deadline of four to six weeks. This statement rattled the oil market, despite indications that tensions in the region might soon ease if a deal is reached.
The US president frequently vacillates between saying the end of the war is near and warning that he is ready to escalate military operations. On Monday, Trump revealed that the US would destroy power plants, oil facilities, and possibly desalination infrastructure if Iran did not immediately open the Strait of Hormuz to commercial traffic. The war has effectively closed the Strait of Hormuz, hindering the supply of crude oil, natural gas, and products like diesel to global markets, driving up energy prices and adding to concerns about an inflation crisis.
The recent attack on the Kuwaiti oil tanker Al-Salmi, which caused a fire and damage to the ship's hull at the Port of Dubai, has further heightened tensions in the region. Iran has regularly targeted ships in the Gulf since the war began, with previous attacks on two vessels near Iraq.
Despite Tuesday's decline in oil prices, WTI for May delivery still posted a more than 50% increase in March, the most since May 2020. Similarly, Brent is on track for a significant increase this month. Market concerns remain about the buildup of US troops in the region and the possible deployment of ground troops in Iran, which could further exacerbate the situation.
According to Shaia Hosseinzadeh, Chief Investment Officer at OnyxPoint Global Management, "Current oil prices are too high for stability and too low to reflect the scale of the physical disruption in the market." Hosseinzadeh also added that Trump appears to have decided that the US must achieve its primary objective, namely disabling Iran's naval and missile arsenal, while ending the current hostilities. The report noted that Washington will pressure Tehran through diplomacy to resume free flow of oil through the Strait of Hormuz.
Looking ahead, traders and investors should pay attention to further developments regarding the US decision to end military operations, as well as Iran's continued hesitance to engage in direct negotiations. Furthermore, volatile energy prices and tensions in the Middle East will continue to significantly impact global oil prices, while ongoing geopolitical tensions have the potential to increase volatility in energy markets. (asd)
Source: Newsmaker.id
