Global oil markets retreated on Tuesday after comments from Donald Trump indicated that the war in the Middle East could end sooner than expected helped calm investor fears of prolonged disruptions to global energy supplies.
Benchmark crude prices fell more than five per cent during the session, reversing part of the rally recorded a day earlier when geopolitical tensions had pushed oil to its highest level in more than three years.
International benchmark Brent Crude dropped $6.64, or 6.7 per cent, to $92.32 per barrel, while West Texas Intermediate (WTI) fell $5.44, or 5.7 per cent, to $89.33 per barrel. Both contracts had earlier declined by as much as 11 per cent during volatile trading.
The pullback followed a hike in prices on Monday when oil climbed above $119 per barrel, the highest level since mid-2022, as supply cuts by major producers and escalating conflict involving Iran heightened concerns over potential disruptions to global oil flows.
Market sentiment shifted after reports that Vladimir Putin had held talks with Trump and proposed measures aimed at accelerating a diplomatic settlement to the conflict, according to a Kremlin aide.
Trump also told CBS News that he believed the military campaign against Iran was progressing faster than initially expected, saying Washington was “very far ahead” of his earlier projection of a four- to five-week timeframe.
Analysts say the comments helped reassure traders that the conflict may not severely disrupt global energy supply routes for an extended period.
“Clearly Trump’s comments about a short-lived war have calmed markets. While there was an overreaction to the upside yesterday, we think there is an overreaction to the downside today,” said Suvro Sarkar, energy sector team lead at DBS Bank.
He added that key Middle Eastern crude grades such as Murban and Dubai were still trading above $100 per barrel, suggesting underlying supply concerns remain.
Oil trading volumes also dropped significantly as market participants reassessed geopolitical risks.
Trading in Brent crude fell to about 284,000 contracts, the lowest level since late February before the escalation of the conflict. Volumes in WTI declined to 255,000 contracts, marking the lowest trading activity in nearly a month.
Lower trading volumes typically signal increased caution among investors as markets await clearer geopolitical signals.
Despite the easing in prices, tensions in the region remain high.
Iran’s powerful military body, the Islamic Revolutionary Guard Corps, warned that Tehran would determine when the conflict ends and threatened to halt oil exports from the region if U.S. and Israeli attacks continued.
State media reported that Iranian officials declared they would not allow “one litre of oil” to leave the region under continued military pressure.
Such threats have intensified concerns over the security of critical shipping routes, particularly the Strait of Hormuz, one of the world’s most important oil transit chokepoints.
At the same time, Washington is reportedly considering measures to stabilise energy markets, including easing sanctions on Russian oil exports and releasing emergency crude reserves.
The policy discussions reflect growing pressure on governments to prevent sustained energy price spikes that could fuel global inflation and disrupt economic recovery.
According to Priyanka Sachdeva, a market analyst at Phillip Nova, the prospect of additional supply reaching global markets helped calm traders.
“Discussions around easing sanctions on Russian oil, comments from Donald Trump hinting that the conflict could eventually de-escalate, and the possibility of G7 countries tapping strategic oil reserves all pointed to the same message — that oil barrels will somehow continue to reach the market,” she said.
Once traders sensed that supply routes might remain intact, the geopolitical “panic premium” embedded in oil prices quickly began to fade, she added.
Nevertheless, major energy producers continue to warn that the situation could deteriorate if shipping routes become unsafe.
Saudi Aramco cautioned on Tuesday that any prolonged disruption to oil shipments through the Strait of Hormuz could have catastrophic consequences for global energy markets.
Investment bank JPMorgan Chase estimated that as much as 12 million barrels per day of oil supply could be affected if maritime transit through the strategic waterway is severely disrupted over the next two weeks.
Despite the market volatility, analysts at Goldman Sachs said they were maintaining their longer-term outlook for crude prices.
The bank forecasts Brent crude will average $66 per barrel in the fourth quarter of the year, while WTI is projected to average $62 per barrel.
However, economists warn that near-term volatility is likely to persist as geopolitical developments continue to shape investor sentiment.
