Crude oil prices fell sharply and equities rallied on Tuesday following comments by US President Donald Trump that the war on Iran would be ending earlier than expected.
As the crisis in the Middle East continued into a second week, Trump said the campaign was far ahead of his initial timeline of around a month.
“I think the war is very complete, pretty much. They have no navy, no communications, they’ve got no air force,” Trump told CBS News by phone.
“If you look, they have nothing left. There’s nothing left in a military sense,” he added.
Trump told the US broadcaster that the United States was “very far” ahead of his initially stated war time frame of four or five weeks.
He later told a news conference in Florida that “it’s going to be ended soon, and if it starts up again they’ll be hit even harder”.
When asked if he thought the war could end in days or weeks, he replied: “I think soon. Very soon.”
The US leader also threatened an attack of “incalculable” size if Tehran blocks oil supplies coming through the Strait of Hormuz, through which a fifth of global supplies pass.
His remarks come days after he issued a statement saying Iran’s “unconditional surrender” was the only acceptable outcome for ending the war.
Iran’s Revolutionary Guards responded by saying they, not the Americans, would “determine the end of the war”.
Investors reacted to the comments, sending crude prices down around 10% on Tuesday before they pared losses to around 5%. European gas prices fell 15%, having risen as much as 30% on Monday.
That came a day after wild swings that saw the commodity rise 30% to a peak above $119 a barrel before falling to as low as $84.
The recovery had already begun earlier on Monday after it emerged that finance ministers from the Group of Seven industrialised nations would discuss tapping stockpiles to ease supply constraints.
Trump also said he would waive some oil-related sanctions, after acknowledging talks with Russian counterpart Vladimir Putin. Moscow has been hit with a range of measures to limit its crude exports since its invasion of Ukraine in 2022.
“We’re looking to keep the oil prices down,” Trump said. “They went artificially up because of this excursion.”
White House officials reassured G7 partners that the move would only be temporary.
Markets rally
Asian stock markets rallied, with Seoul up more than 5% and Tokyo 2,9%. There were also advances in Hong Kong, Shanghai, Sydney, Singapore, Bangkok, Mumbai, Taipei, Manila and Jakarta.
London, Paris and Frankfurt all rallied at the open.
All three main indexes on Wall Street ended sharply higher, having reversed early heavy selling, though futures slipped on Tuesday.
Diplomatic efforts focused on the Strait of Hormuz, which has been blocked to nearly all oil tankers.
French President Emmanuel Macron said on Monday France was working with allies on a “purely defensive” mission to reopen the waterway.
About 10 vessels in or near the Strait of Hormuz have come under attack since Iran blocked the strait in retaliation for the US-Israeli strikes, shipping experts say.
Global shipping giant MSC announced it was formally halting some export shipments from the Gulf, while Bahrain’s state-owned energy company Bapco joined counterparts in Qatar and Kuwait in declaring “force majeure” – a warning that events beyond its control may lead it to miss export targets.
The Saudi defence ministry said on Monday it had thwarted a drone attack targeting an oil field in the kingdom’s east, near the Emirati border.
Chris Weston, an analyst at Pepperstone, said: “It has been a wild ride for traders and investors to navigate the price action put to them over the past 24 hours, with reversals taking place across many parts of the financial markets.
“The pressure valve has clearly been released for now. However, volatility across energy markets remains elevated.
“While the most extreme stress has eased, markets are still pricing a significant degree of uncertainty and risk.
“The geopolitical backdrop remains fluid, and traders should expect volatility to remain a defining feature of the trading environment in the days ahead.”
You must be logged in to post a comment.