Oil Plunges as Trump Cancels Iranian Strikes, Extends Losses Amid Geopolitical Uncertainty
Oil prices declined on Friday, extending losses from the previous trading session. The market reacted swiftly to news that US President Donald Trump had called off planned strikes against Iran. This move aimed at de-escalating hostilities following tit-for-tat attacks earlier in the week.The reduction in immediate fears of military escalation led to a correction in commodity markets. Brent futures saw a slight uptick, rising $1.21 or 1.3% to $89.17 a barrel at 0042 GMT. Meanwhile, US West Texas Intermediate (WTI) crude climbed $1.23, or 1.4%, hitting $86.48.
Market Correction Amid Geopolitical De-escalation
The cancellation of the planned strikes came after President Trump had previously threatened to attack Iran "very hard." He announced that discussions with Tehran had reportedly progressed. This news provided a degree of relief to global energy markets.However, reports from Iran's semi-official Fars news agency contradicted this narrative regarding diplomatic progress. The agency reported that Tehran had not approved the text of any formal agreement.
Persistent Risks Posed by Strait of Hormuz Blockade
Despite the immediate market response to the canceled strikes, the underlying geopolitical risks remain highly elevated. On Wednesday, Iran had announced the closure of the vital Strait of Hormuz. This declaration stated that any vessel attempting passage through the strait would face fire.Tehran's blockade of this waterway—a route critical for global oil and liquefied natural gas shipments—has significantly pressured commodity prices over recent months. The US military has since confirmed on social media platforms that commercial ships continued to transit the contested waterway.
Analyst View: Risks Remain Skewed to the Upside
The swift market reaction to the news is characterized by analysts as being both decisive and cautious. IG market analyst Tony Sycamore noted that while this development could be a "false dawn," the risks associated with regional tensions persist.Scamore added that, even as oil prices correct downwards, the risk profile remains heavily skewed towards upside. He stressed that confidence in the market will continue so long as crude prices can hold firm above support levels in the low $80s range.
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