Global oil prices dropped sharply on Tuesday after former U.S. President Donald Trump suggested that the conflict involving Iran could soon come to an end, easing fears of prolonged disruptions to Middle Eastern energy supplies.
On Monday, crude oil prices had surged close to $120 per barrel, driven by concerns that the war might severely affect global oil shipments from the Gulf region. However, after Trump indicated that the conflict could conclude quickly, prices retreated to about $90 per barrel, calming energy markets.
Despite the drop, oil remains considerably more expensive than it was before the outbreak of hostilities. Financial markets in Europe reacted positively to the decline in energy costs. London’s FTSE 100 index rose 1.9%, while gas prices also declined.
Speaking to reporters in Florida, Trump said he believed the conflict was largely resolved, describing the military action as a limited operation aimed at eliminating a threat. However, he also warned Tehran against interfering with traffic in the Strait of Hormuz, a strategic maritime corridor through which roughly 20% of the world’s oil supply passes.
Trump warned that any attempt by Iran to block the shipping route would provoke a significantly stronger response from the United States.
Iran’s Islamic Revolutionary Guard Corps (IRGC) reacted strongly to the remarks, stating that its armed forces would not permit oil exports from the region if Iran’s interests were threatened.
Energy markets reacted quickly to the shifting rhetoric. Brent crude briefly fell below $84 per barrel before stabilizing around $90.21 later in the day.
Natural gas prices also eased. In the United Kingdom, month-ahead gas contracts fell by more than 10%, dropping to 123 pence per therm from a peak of 171 pence recorded the previous day.
Analysts say the drop in prices offered traders a moment of relief, but warned that the situation remains highly volatile. Alberto Bellorin, founder of investment firm InterCapital Energy, described the energy market as being in a constant tug-of-war between fears of escalation and hopes for de-escalation.
According to Bellorin, prices could spike again if the conflict intensifies but may continue to decline if tensions ease.
Stock markets across Europe mirrored the recovery seen earlier in the United States and Asia. Germany’s DAX index rose 2.6%, while France’s CAC 40 gained 2.1%.
Asian markets also rebounded strongly. Japan’s Nikkei 225 climbed 2.9%, recovering some of Monday’s losses, while South Korea’s Kospi index surged 5.4%.
Investors had previously been worried that a disruption in Gulf oil shipments could push up inflation and force central banks to keep interest rates higher for longer.
The strategic importance of the Strait of Hormuz has been highlighted throughout the crisis. Shipping traffic through the narrow waterway has slowed significantly since the conflict began more than a week ago.
The chief executive of Saudi Aramco, Amin Nasser, warned that prolonged disruptions could have severe consequences for global energy markets. He noted that worldwide oil inventories are already at their lowest levels in five years, meaning supply shortages could worsen if exports remain constrained.
G7 leaders have been discussing possible measures to stabilize the market, including the potential release of oil from strategic reserves coordinated with the International Energy Agency (IEA). However, no final decision has been made.
Energy analyst Robin Mills of Qamar Energy said governments are cautious about using these reserves too early because once they are depleted, they cannot easily be replaced.
“If the conflict truly ends soon, as Trump suggests, then there may be no need to tap into strategic reserves,” Mills explained. “But if disruptions continue, releasing some supply could help calm the market.”
Meanwhile, UK Chancellor Rachel Reeves urged immediate de-escalation in the Middle East and emphasized the importance of protecting shipping routes. She said Britain is ready to support a coordinated release of emergency oil reserves if necessary.
Before the outbreak of the conflict, financial markets had anticipated that the Bank of England might cut interest rates later this year. However, the surge in oil prices had raised concerns about renewed inflationary pressure.
Government bond yields reflected the shifting outlook. The yield on two-year UK bonds dropped to 3.87% on Tuesday after climbing as high as 4.15% the previous day. Prior to the war, the yield had stood around 3.5%.
