When President Donald Trump canceled a planned attack on Iran and announced a return to the negotiating table for peace talks, the price of oil plummeted.
„I agree to suspend bombings and attacks on Iran,” Trump wrote on the Truth Social platform.
This happened on April 8, when Trump announced a truce with Iran. On that day, the price of oil dropped by 13%.
In the last five months, Trump has repeatedly stated that significant progress has been made in negotiations with Iran, leading him to abandon planned military actions against the country. These announcements have consistently pushed oil prices down, writes CNN in an analysis.
The same thing happened last week when oil prices dropped by 20% in just three days after Trump suspended plans to attack Iran. And the phenomenon repeated itself on Monday: oil lost another 5% after Trump canceled a „massive attack” on the country and declared that negotiations would resume.
Until now, you would have expected the oil market to have learned its lesson and not believe the president who „cries peace.” However, the market continues to be influenced by Trump’s narrative, showing almost saintly patience as deadlines come and go, negotiations progress and stall, and bombings start and stop.
„There have been significant advances towards a complete and definitive agreement with representatives of Iran,” Trump said when he decided to postpone a military intervention in the Strait of Hormuz.
That statement was made on May 5. After that message, oil dropped by 13% in three days.
### Mole Day
The oil market has been extremely volatile throughout the conflict, recording increases of at least 9% in six intervals of one or more days starting in March. However, the dominant trend has been one of optimism about peace: during the same period, oil dropped by at least 9% in eight distinct episodes.
Most of these declines were caused by statements from Trump or his administration regarding progress in negotiations or promises to reopen the Strait of Hormuz.
– **March 10:** Energy Secretary Chris Wright falsely claimed that a U.S. military ship escorted a tanker through the strait. Oil plummeted by 11%.
– **March 23:** „I am pleased to announce that the United States of America and the Islamic Republic of Iran have had very good and productive discussions in the last two days,” Trump wrote in capital letters on Truth Social. Oil dropped by 11%.
– **May 29:** „Negotiations with the Islamic Republic of Iran are going very well!” Trump posted. Oil lost 10% on that very day.
– **June 11:** „I don’t know if you heard, but today we ended the war with Iran,” declared Trump, canceling a major airstrike. The statement triggered a 16% drop in oil prices over the next four days.
„It’s Mole Day, episode 15,” commented Andy Lipow, president of Lipow Oil Associates.
### Market Still Hopeful
Although misled for months, the market may still have valid reasons to remain optimistic.
Just six months ago, before the outbreak of the war, the main concern was oversupply. OPEC countries, unhappy with production restrictions, were increasing their oil extraction despite relatively low demand. There was historically high oil volume in storage globally, and producers were supplying about 4 million barrels per day more than buyers consumed, according to Capital Economics.
Then, a month ago, oil prices rapidly fell below pre-war levels as the market found itself in surplus again. During the conflict, the global economy learned to function without the 13 million barrels of oil that daily passed through the Strait of Hormuz.
A significant portion of these volumes was recovered by redirecting exports through Saudi Arabia to the Red Sea – about 5 million barrels per day, according to Kpler. Meanwhile, Houthi rebels, Iran’s allies, blocked another strategic route, the Bab el-Mandeb strait, putting pressure on Saudi Arabia’s ability to export oil through this alternative route.
Another significant part of the 13 million barrels missing was compensated by releasing emergency strategic reserves of Western countries, led by the United States. At the same time, China, holding huge oil stocks, reduced its reserves and cut oil imports by over 4 million barrels per day, according to JPMorgan.
Thus, when the Strait of Hormuz temporarily reopened in June for about three weeks, nearly 200 million barrels of oil quickly flowed out of the Persian Gulf for the first time in months. The market suddenly found itself flooded with oil before having time to adapt, and prices plummeted.
The fragile peace did not last, but the market remembers well what happened both in February and June.
### Tipping Point
Nevertheless, the difference between oil prices and the actual level of market tension has rarely been so high.
„Oil company inventories are rapidly declining. The situation is particularly visible in Cushing, Oklahoma – the main hub of U.S. oil pipelines – where reserves have fallen well below operationally safe levels,” the U.S. Energy Information Administration said.
According to the agency, this essential center, where Texas oil is transported, assessed, stored, and then redistributed to refineries, has recently reached just 18.6 million barrels. Any level below 20 million barrels puts additional pressure on facility operations, requiring more force to push oil through pipelines.
At some point, only sediment will remain in the tanks, and the laws of physics will hinder the efficient circulation of oil through these essential pipelines.
Cushing is not an isolated case. Commercial oil stocks worldwide are approaching critical operating levels, equivalent to about 57 weeks of supply, according to Kieran Tompkins, chief economist for climate and commodities at Capital Economics. The global operational stress threshold is estimated at about 55 weeks.
For this reason, Tompkins argues, the market undervalues this risk. When global oil reserves have been at such low levels, prices have typically been about 20% higher.
Without a significant and sustained resumption of oil flows through the Persian Gulf, the market will inevitably reach a „tipping point” – the moment when stocks can no longer compensate for the loss of supply.
At that point, the only solution will be a sharp increase in oil prices, enough to reduce demand and bring the market back into balance. For this to happen, oil prices could exceed $150 per barrel, well above its historical peak.
This could happen in an instant. But, for now, the market continues to believe Trump when he says a solution is just around the corner.