Sharecafe

Oil Prices Plunge as Geopolitical Tensions Ease

Thumbnail
Iran's measured response alleviates supply disruption fears; Trump urges more drilling.

Oil prices experienced a sharp decline following Iran’s retaliatory strikes on a US air base in Qatar. The strikes, which were less severe than anticipated, calmed market anxieties about immediate disruptions to Middle Eastern oil supplies. West Texas Intermediate crude plummeted by over 7 per cent, dipping below $US69 a barrel in New York trading. Brent crude also saw a significant drop, falling 7.1 per cent to $US71.51.

Initial fears centred on a potential closure of the Strait of Hormuz, a critical transit point for approximately one-fifth of the world’s oil supply. However, reports indicate that the barrage was intercepted without casualties. Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted that the market is interpreting the situation as a sign that energy infrastructure isn’t Iran’s primary target for retaliation. She added there were signs of advance warning to the US, pointing to a possible face-saving manoeuvre rather than a genuine escalation.

Contributing to the price decline was a social media post from US President Donald Trump, cautioning against rising oil prices and encouraging the Energy Department to boost drilling efforts. US Energy Secretary Chris Wright responded promptly. These factors combined to ease concerns that had initially arisen following Israel’s attack on Iran, which prompted fears of supply interruptions and led to increased trading activity in oil futures and options.

Despite earlier warnings from Tehran about ‘everlasting consequences’ and reports of a continuing high risk of strikes against American forces, the market appears to have priced in a lower likelihood of immediate and severe supply disruptions, leading to the sharp correction in oil prices.

Serving up fresh finance news, marker movers & expertise.
LinkedIn
Email
X

All Categories