Iran War: Oil Prices Fall as Trump Predicts Quick End to Conflict – Live Updates

Oil prices retreated sharply Tuesday morning, falling back under $90 a barrel after surging to four-year highs yesterday, following US President Donald Trump’s assertion that the conflict with Iran would be a “short-term excursion” ending “incredibly soon.” The shift reflects a volatile market reacting to rapidly changing signals from Washington, even as military strikes continue and the potential for wider regional escalation remains high.

A Volatile Market Response

Brent crude futures initially dropped as much as 11% to below $88.05 per barrel in Asian trading, before paring some of those gains to settle down 6.6% as of mid-day in Europe. The initial plunge underscores the market’s sensitivity to geopolitical risk and the potential for supply disruptions in the Middle East, a region critical to global energy flows. The price had previously spiked amid concerns over the duration of the conflict, reaching levels not seen since mid-2022. The swings highlight the precariousness of the situation, where pronouncements from political leaders can have an immediate and substantial impact on commodity markets.

The Conflict’s Escalation and Human Cost

The price volatility comes as the US and Israel continue military operations within Iran. Explosions rocked Tehran overnight Monday, following renewed strikes on targets across the country. More than 1,300 people have been killed in Iran since the conflict began, according to Iran’s UN ambassador, a figure that underscores the escalating human cost of the military action. Iran’s Revolutionary Guards have warned they will not allow “one litre of oil” to be exported from the region if attacks continue, raising the specter of further disruptions to global supply. Trump, for his part, has threatened “death, fire and fury” should Iran interfere with shipping in the Strait of Hormuz, a vital chokepoint for oil tankers.

Strait of Hormuz and Global Supply Concerns

The Strait of Hormuz remains a central point of concern. Approximately 20% of the world’s oil supply passes through this narrow waterway, and the conflict has already effectively halted tanker traffic for over a week. This disruption is forcing producers to curtail output as storage facilities reach capacity. While Trump has pledged US naval support to protect tankers, the timeline for such a deployment remains unclear. The situation is further complicated by the potential for asymmetric responses from Iran, including attacks on shipping or infrastructure in the region. Reuters reports that the market is closely watching for any signs of escalation that could further jeopardize supply.

European Energy Security and Government Response

European governments are increasingly focused on the potential impact on energy prices. EU finance ministers are meeting to discuss the situation, and G7 energy ministers are scheduled to hold a call to coordinate a response. The EU imports over 90% of its oil and 80% of its gas, making it highly vulnerable to fluctuations in global energy markets. Tánaiste Simon Harris has indicated that the Irish government is adopting a “wait-and-see” approach, wary of intervening prematurely, but prepared to act if the conflict drags on. He acknowledged the potential for a return to the steep cost inflation experienced after Russia’s invasion of Ukraine. The Irish Times reports that the government wants to avoid rushing into any response to spiking energy costs.

The Appointment of Mojtaba Khamenei and Iran’s Position

The appointment of Mojtaba Khamenei as Iran’s novel supreme leader, following the death of Ayatollah Ali Khamenei, has added another layer of complexity to the situation. Abbas Araghchi, Iran’s foreign minister, stated in an interview with PBS News Hour that the US and Israel had failed in their attempt to engineer a regime change. He as well maintained that the spike in oil prices was not Iran’s fault, but rather a consequence of the attacks and aggression by the US and Israel, which had made the region insecure. Araghchi indicated that Iran is not currently considering resuming negotiations with the US, citing a “bitter experience” with past talks. PBS News Hour detailed the circumstances surrounding the assassination of the former supreme leader.

US-Israel Coordination and Netanyahu’s Stance

The conflict was initiated by a joint US-Israeli strike on February 28th that killed Ayatollah Ali Khamenei. Israeli Prime Minister Benjamin Netanyahu has stated that Israel’s military offensive is “not done yet” and that the country is “breaking their bones.” He also suggested that Israel could continue the war even after the US decides to halt its strikes, though President Trump has indicated he doesn’t believe that will be necessary. The Times of Israel reported on Trump’s assertion that a decision on ending the war will be “mutual” with Netanyahu.

Potential for Further Escalation and Diplomatic Efforts

France is preparing a “purely defensive” mission with allies to reopen the Strait of Hormuz, aiming to ensure the continued flow of oil and gas. However, the situation remains highly fluid, and the potential for further escalation is significant. Turkey has deployed a US Patriot air defense system to its southeastern Malatya province as a precautionary measure. Meanwhile, reports are emerging that US-made missile fragments were found at the site of a strike on a school in Iran, raising questions about the origin of the attack and potentially complicating diplomatic efforts.

What Happens Next

The immediate future hinges on several key developments. The G7 is expected to discuss potential coordinated measures to address rising energy prices, though a commitment to releasing strategic reserves remains uncertain. The EU will also consider options to mitigate the impact on European consumers and businesses. The duration of the conflict will depend on the evolving dynamics between the US, Israel, and Iran, as well as the potential for diplomatic intervention. The appointment of Mojtaba Khamenei as Iran’s new supreme leader introduces a new variable, and his approach to the conflict will be closely watched. The situation remains highly volatile, and further disruptions to global energy markets are likely.