Oil Prices Retreat After Trump Suspends Planned Strike on Iran

Oil prices moved lower on Tuesday after US President Donald Trump announced he was postponing a planned military strike on Iran, offering financial markets a brief moment of relief after weeks of escalating tension in the Gulf.

Brent crude, the international benchmark, slipped by more than 1% in early trading to around $110 per barrel, while US West Texas Intermediate futures also declined. Traders appeared to interpret Trump’s latest comments as a sign that immediate military escalation may be avoided — at least for now, which in the current geopolitical climate practically counts as a calming influence.

The US president said he had decided to delay the attack following appeals from leaders in Qatar, Saudi Arabia and the United Arab Emirates, who reportedly urged Washington to give ongoing negotiations with Tehran more time. Trump described the talks as serious and indicated that Gulf allies believed a diplomatic agreement remained possible.

The announcement came shortly after Iranian officials confirmed they had responded to a new American proposal aimed at ending the conflict that has destabilised the region since late February.

Markets reacted quickly because the war has already severely disrupted energy supplies through the Strait of Hormuz, one of the world’s most strategically important shipping routes. The narrow waterway normally handles roughly a fifth of global oil and liquefied natural gas exports, making every headline from the Gulf capable of moving prices within minutes.

Despite Tuesday’s price drop, analysts warn the broader energy situation remains fragile.

Fatih Birol, executive director of the International Energy Agency, said global oil inventories are falling rapidly and warned that available reserves may only cover a few weeks of demand if current disruptions continue.

Speaking during a meeting of G7 finance ministers in Paris, Birol pointed to a sharp decline in commercial stockpiles following the outbreak of hostilities between Iran, Israel and the United States.

According to preliminary IEA figures, global oil inventories dropped by 129 million barrels in March and another 117 million barrels in April. The largest declines were recorded in OECD economies, where onshore reserves fell particularly sharply.

The agency estimates that cumulative supply losses linked to disruptions in Gulf exports have now exceeded one billion barrels. More than 14 million barrels per day are reportedly unable to leave the region because of restrictions and security concerns linked to the Strait of Hormuz.

The IEA suggested demand conditions could improve later this year if negotiations succeed and shipping flows gradually resume from the third quarter onward. Until then, however, volatility is expected to remain high, especially heading into the peak summer travel season when fuel consumption traditionally rises.

Energy markets are now balancing two competing realities at once: fears of a wider regional war on one side, and cautious optimism over diplomacy on the other.

Trump’s decision to pause military action may have temporarily lowered the temperature in oil trading rooms, but traders know the situation can reverse almost instantly. In recent weeks, Washington has repeatedly alternated between threats of force and calls for negotiations, leaving markets struggling to price in what comes next.

For now, investors appear willing to believe diplomacy still has a chance. But with reserves shrinking, shipping routes under pressure and the world economy heavily dependent on Gulf energy flows, the margin for error is becoming increasingly narrow.

Written by Andreas Hofer