Oil Prices Fall as Trump Suggests Possible Sanctions Relief
Oil prices dropped after US President Donald Trump said the United States may ease oil sanctions on some countries. His comments gave the oil market some relief after several days of strong price increases.
On Monday, Trump said the war involving Iran might not last long. He also said the US government is thinking about temporarily removing oil-related sanctions on certain countries to help reduce pressure on global oil prices.
Trump told reporters that the US might remove sanctions for some countries until the situation becomes more stable. However, he did not say which countries could receive this relief.
At present, the United States has sanctions that affect oil trade with several countries, including Iran, Venezuela, Russia, Syria, and North Korea.
Trump also said he spoke with Russian President Vladimir Putin on Monday. The two leaders discussed the war and several other global issues.
Following Trump’s remarks, oil prices quickly moved lower. Both major oil benchmarks, West Texas Intermediate crude oil and Brent crude oil, fell by more than 9 percent.
During European trading hours, Brent crude was trading just under $90 per barrel, while WTI crude stood at about $85.40 per barrel.
Earlier, oil prices had surged to their highest level since 2022, reaching nearly $120 per barrel. The increase happened after Iran’s Assembly of Experts selected Mojtaba Khamenei as the country’s new supreme leader following the death of his father.
Many investors believed this decision showed that Tehran planned to continue its hardline approach, even as the conflict with the United States and Israel entered its tenth day.
However, later in the day oil prices fell and US stock markets rose. Investors became more hopeful that the war with Iran could end sooner than expected.
Speaking to Republican lawmakers at his golf club near Miami, Trump said the US had taken a brief action in the Middle East to deal with what he described as “evil.” He added that the military operation was likely to be short-term.
Despite this, Trump warned that the conflict could become more serious if Iran disrupts global oil supplies.
Later, Trump posted a message on social media with a strong warning. He said that if Iran stops oil shipments through the Strait of Hormuz, the United States would respond with much stronger military action.
The Strait of Hormuz is a narrow waterway near Iran that is extremely important for global energy supply. About one-fifth of the world’s oil passes through this route every day.
In response to Trump’s comments, Iranian state media reported that Ali Mohammad Naini, a spokesperson for Iran’s paramilitary Revolutionary Guard, said Iran would decide when the war ends.
Global stock markets rise
Financial markets reacted positively to Trump’s comments.
Major stock markets across Europe opened higher. The FTSE 100 in London rose more than 1.1 percent. In France, the CAC 40 increased by 1.9 percent.
Germany’s DAX climbed about 2 percent, while major indexes in Madrid and Milan rose around 2.5 percent. The pan-European Stoxx Europe 600 also increased by 1.7 percent.
Asian markets also recovered on Tuesday after heavy losses the previous day. Investors became more confident that the conflict might not continue for long.
Japan’s Nikkei 225 rose 2.9 percent. The rise was supported by new government data showing that Japan’s economy grew faster than expected during the final quarter of last year.
According to the updated data, Japan’s economy expanded at an annual rate of 1.3 percent, much stronger than the earlier estimate of 0.2 percent. Strong business investment helped boost the growth.
South Korea’s Kospi jumped 5.4 percent, while Australia’s S&P/ASX 200 gained 1.1 percent.
Neil Newman, head of strategy at Astris Advisory Japan, said the market rebound was mainly due to Trump’s positive comments.
He said investors are starting to feel more hopeful that the war could end soon. However, he added that market volatility will likely continue for some time.
Hong Kong’s Hang Seng Index rose 2.1 percent, while China’s Shanghai Composite increased 0.6 percent.
Oil prices remain the key concern
In recent days, stock markets have closely followed movements in oil prices. As the conflict has intensified, oil prices have become more unstable.
The biggest question for investors is how high oil prices could rise and how long they might stay elevated.
Ongoing disruptions to energy infrastructure in the Middle East have created uncertainty about future oil supplies.
If oil prices remain very high for a long period, it could create serious problems for the global economy. Many households are already struggling with high inflation, and expensive energy would increase their living costs even more.
Businesses would also face higher costs for fuel, transportation, and production.
Economists warn that the worst possible outcome could be stagflation — a situation where economic growth slows while inflation remains high.
Much of the concern is focused on the Strait of Hormuz. Iran has previously threatened to attack ships passing through the waterway.
Analysts say that if the route is closed for even a few weeks, oil prices could rise sharply.
Strategists at Macquarie Research believe oil could climb to $150 per barrel or higher in such a scenario.
Meanwhile, movements in financial markets reflected the easing of oil prices.
The yield on the 10-year US Treasury bond fell slightly to 4.10 percent after earlier rising above 4.20 percent when oil price fears increased.
Currency markets were relatively stable. The US dollar moved slightly against the Japanese yen, while the euro remained mostly unchanged.
Gold prices rose by 1.7 percent to about $5,191 per ounce, as some investors still preferred safe-haven assets during the uncertainty.
Cryptocurrency markets also moved higher. The largest digital currency, Bitcoin, rose 2.6 percent to about $70,863, according to the CoinDesk Bitcoin Price Index.
Overall, markets remain highly sensitive to any new developments in the conflict and to signals from global leaders about the future of oil supply and sanctions.
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