How Trump’s surprise Iran remarks sent oil prices tumbling

Trump

Oil prices sank around 10 per cent on Monday after US President Donald Trump suddenly ordered a halt to strikes on Iranian energy infrastructure after citing “very good” talks with Tehran.

Despite Iran’s foreign ministry denying any such negotiations, Trump’s statement offered relief to crude prices, which have surged since the outbreak of the Middle East war.

AFP explains why.

– Energy market overheating –

Oil and gas prices have soared following the United States and Israel unleashing strikes on Iran on February 28, triggering retaliation from Tehran.

International benchmark Brent North Sea crude has since jumped more than 40 percent, while European gas prices have rocketed over 75 percent.

Energy exports from the Gulf — including Saudi Arabia, Iraq and Qatar — have been disrupted by the near-paralysis of the Strait of Hormuz, a vital shipping route through which around 20 percent of the world’s oil and liquefied natural gas normally passes.

The global economy is under “major threat” from the resulting energy crisis, International Energy Agency chief Fatih Birol said Monday.

The war has removed around 11 million barrels of oil per day from the market, more than the combined impact of the oil crises of the 1970s, he added.

With prices sharply higher, investors were on edge as markets remained volatile.

So when Washington signalled a possible de-escalation, many investors rushed to sell and lock in profits, triggering a rapid fall in prices.

– Fears of $150 per barrel –

Investors were rattled after Trump warned on Saturday that Iran had 48 hours to reopen the Strait of Hormuz or face the destruction of its energy infrastructure. Punch