Oil prices experienced a second consecutive day of significant declines on Tuesday, driven by market expectations that a ceasefire between Israel and Iran would hold. This development has eased concerns about a major disruption to global crude oil supplies. U.S. crude oil settled down 6% at $64.37 a barrel, while the global benchmark Brent fell 6.1%, to $67.14. Prices had already closed 7% lower on Monday, reflecting initial market optimism about the de-escalation of conflict in the Middle East. The day prior, President Donald Trump indicated China could continue importing oil from Iran.
President Trump stated in a social media post, “China can now continue to purchase Oil from Iran. Hopefully, they will be purchasing plenty from the U.S., also. It was my Great Honor to make this happen!” However, a senior White House official clarified to CNBC that Trump “continues to call on China and all countries to import our state-of-the-art oil rather than import Iranian oil in violation of U.S. sanctions.”
In May, Trump had threatened to restrict any country purchasing Iranian oil from conducting business with the U.S. Data from Kpler indicates that China purchases the majority of Iran’s typical daily exports of 1.7 million barrels. The White House official explained that Trump’s comments about China’s continued oil purchases from Iran were contingent on the Strait of Hormuz remaining open due to the ceasefire.
The Strait of Hormuz, a narrow waterway between Iran and Oman, is a critical transit route for approximately 20% of the world’s oil supply. Investors had been concerned that Iran might attempt to close the strait during its conflict with Israel, which would severely impact global oil markets. However, with the ceasefire looking increasingly likely, these fears have subsided, contributing to the downward pressure on oil prices.
