Oil prices dropped by over 13% on Monday after an announcement by US President Donald Trump that he would instruct the military to delay any strikes on Iranian power plants and energy infrastructure.
Brent prices had dropped below $100 per barrel briefly to trade around $96 a barrel earlier in the session.
Meanwhile, West Texas Intermediate crude plunged to a session low of $85.28 a barrel.
Trump’s statement brings relief
On Monday, Trump announced he would postpone any strikes against Iran’s power plants and energy infrastructure, citing “constructive talks” between the US and Iran.
This decision followed a threat from Iran that it would retaliate by attacking Israel’s power plants and those supplying US bases in the Gulf region if Washington targeted Iran’s power network.
Conversations with Iran will continue throughout the week. Trump said in a social media post.
Following Trump’s post on Truth Social, the dollar dropped sharply while stocks experienced a significant surge.
Trump stated that the United States and Iran “have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.”
“I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings and discussions.”
Brent prices climbed initially to $114
Trump issued a warning on Saturday, stating that Iranian power plants would face destruction if Tehran did not grant “fully open” access to the Strait of Hormuz for all shipping within 48 hours.
The deadline set by Trump is around 7:44 p.m. EDT (2344 GMT) on Monday.
After Trump’s comments, Iran issued a warning that it would take out power plants and US base energy supplies in the Middle East.
Following a threat from Iran’s Revolutionary Guards to target Israeli power plants and US base energy supplies in the Middle East, oil prices had initially climbed on Monday.
Iran’s threat was issued in retaliation for any potential attack on Tehran’s own electricity sector.
Brent crude oil had climbed to a session’s high of $114.31 per barrel, following the threat from Iran.
The conflict, initiated by the US and Israel on February 28, has resulted in over 2,000 fatalities.
This war has severely disrupted markets, causing fuel costs to rise, intensifying worries about global inflation, and straining the post-war Western alliance.
Furthermore, the conflict has severely impacted key energy infrastructure in the Gulf and almost stopped maritime traffic through the Strait of Hormuz, a crucial choke point for roughly 20% of the world’s oil and liquefied natural gas shipments.
As a result, analysts project a daily loss of 7 to 10 million barrels of oil production across the Middle East.
“Oil prices are expected to remain stable to higher until it becomes clear whether the US will, in fact, go ahead with attacking Iranian power plants,” PVM oil analyst Tamas Varga was quoted in a Reuters report.
“It would draw significant retaliatory measures from Iran, sending prices considerably higher.”
The International Energy Agency’s executive director, Fatih Birol, stated on Monday that the current Middle East crisis surpasses the combined severity of the two oil shocks experienced in the 1970s.
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