Oil Prices Drop After News of Trump's Willingness to End the Iran War

SadaNews - Oil prices have dropped after the Wall Street Journal reported that U.S. President Donald Trump informed his aides of his readiness to end the military campaign in Iran, even if the vital Strait of Hormuz remains largely closed.

West Texas Intermediate crude fell below $102 a barrel, after rising about 4% earlier following a new Iranian attack on an oil tanker in the Arabian Gulf. May Brent crude contracts dropped about 1.9% to $105.36 per barrel.

Trump and his aides assessed that the mission to reopen the strait could push the conflict beyond the timeline they set of four to six weeks, according to the report.

Shayeh Hosseini Zadeh, Chief Investment Officer at Onyx Point Global Management, stated: "The market positioning had been complacent. Now the $100 level feels like a gray area, it's too high to be stable and too low to reflect the actual scale of the disruption." He added: "Price signals do not adequately reflect the battlefield reality."

Supply Disruptions and Escalating Geopolitical Risks

The conflict has effectively closed this vital shipping corridor, contributing to the strangulation of crude oil and natural gas supplies and products like diesel heading to global markets, pushing energy prices up and raising fears of a inflation crisis.

Despite Trump repeating that an agreement with Iran is imminent, the United States has sent more troops to the region as the war enters its fifth week.

A fully laden Kuwaiti oil tanker was struck at the port of Dubai, resulting in a fire and damage to its structure, according to a statement from the Kuwait Petroleum Corporation. Iran has been targeting ships across the Arabian Gulf since the war began, previously attacking two ships near Iraq.

The attack on the "Al Salmi" tanker, a giant oil tanker, occurred shortly after midnight local time, and the Kuwait Petroleum Corporation stated that the attack may have caused an oil spill in the surrounding waters. Firefighting teams are working to control the fire, according to the media office of the Dubai government in a post on the "X" platform.

Rising Prices Create Political and Economic Pressure

U.S. crude has risen more than 50% in March, the largest increase since May 2020. The average price of gasoline in the United States is close to surpassing $4 per gallon, which is likely to increase political pressures on Trump.

Rebecca Babin, senior energy trader at CIBC Private Wealth Group, stated: "The tone regarding any exit from the war remains one step forward and five steps back."

She added: "With 10 to 12 million barrels per day effectively absent from the market, the precautionary margins are fading, and discussions about falling oil prices become less impactful."

Widening Scope of War and Threat to Alternative Routes

The war saw further escalation over the weekend after Iranian-backed Houthis in Yemen entered the conflict, attacking Israel with missiles.

Tehran is also pressuring militants in Yemen to prepare for a new campaign against shipping in the Red Sea, which could threaten oil supplies from alternative routes outside the Strait of Hormuz, such as shipments from the Saudi port of Yanbu.

Treasury Secretary Scott Pison told Fox News that the United States will "regain control" of the Strait of Hormuz, ensuring freedom of navigation "through American or multinational escort." In contrast, the Iranian parliament has approved legislation to impose fees in the strait, according to the semi-official Fars news agency.