NEW YORK — Just a day after oil prices surged to near four-year highs, the global energy market suddenly reversed course.
On Tuesday, oil prices plunged by more than $10 per barrel, sending shockwaves through the market after former US President Donald Trump suggested the war in the Middle East could end soon.
The sharp drop came as investors began to believe that the conflict might not disrupt global oil supplies for as long as previously feared.
By mid-day trading in New York, Brent crude had fallen $10.45, or 10.6%, to $88.51 a barrel.
Meanwhile, US West Texas Intermediate (WTI) crude slid $10.61, or 11.2%, to $84.16 per barrel.
The sudden plunge was dramatic.
Just one day earlier, oil had surged past $119 a barrel, its highest level since mid-2022, fueled by fears that escalating tensions in the Middle East could severely disrupt global energy supplies.
Supply cuts by Saudi Arabia and other major producers had already tightened the market. Then the conflict raised fears that shipping routes and production facilities could be affected.
But markets quickly calmed after signs of possible diplomacy.
Reports emerged that Trump and Russian President Vladimir Putin had spoken by phone, sharing proposals aimed at reaching a quick settlement to the conflict.
In an interview with CBS News, Trump said he believed the war involving Iran was already nearing completion.
He even suggested the situation was moving much faster than his earlier prediction of four to five weeks.
Those comments were enough to shift market sentiment almost overnight.
“Clearly Trump’s comments about a short-lived war have calmed markets,” said Suvro Sarkar, energy sector team lead at DBS Bank.
He noted that markets often react strongly during moments of uncertainty.
“While there was an overreaction to the upside yesterday, we think there is an overreaction to the downside today,” Sarkar explained.
Still, energy analysts warn that even if the conflict ends soon, oil supplies will not instantly recover.
Restarting production after disruptions can take time.
“When the conflict ends, cranking up the supply chain won’t be swift,” said Simon Flowers, chairman and chief analyst at Wood Mackenzie.
Some oil stored in refineries or ports could be shipped quickly.
But if oil wells have been shut down for long periods, bringing them back to full production could take weeks—or even longer.
Meanwhile, tensions in the region remain high.
Iran’s Islamic Revolutionary Guards Corps warned that Tehran could block oil exports from the region if attacks by the United States and Israel continue.
“If attacks persist, not one litre of oil will be exported,” Iranian state media quoted the group as saying.
At the same time, reports suggest Trump is considering easing oil sanctions on Russia and possibly releasing emergency oil reserves to stabilize global prices.
Energy analysts say those discussions send a clear signal to markets.
According to Phillip Nova analyst Priyanka Sachdeva, the message is that global oil supply may still reach the market despite ongoing tensions.
However, the situation remains fragile.
Energy ministers from G7 countries discussed the possibility of releasing strategic oil reserves during a call Tuesday—but stopped short of making a final decision.
Meanwhile, Saudi Arabia’s Aramco, the world’s largest oil exporter, issued a stark warning.
If the conflict continues to disrupt shipping in the Strait of Hormuz, the consequences for global energy markets could be catastrophic.
Financial giant JPMorgan estimates that as much as 12 million barrels of oil per day could be at risk if the vital shipping route becomes unsafe.
Adding to the uncertainty, Abu Dhabi’s state oil company ADNOC shut down its Ruwais refinery after a fire broke out following a drone strike at a nearby facility.
With tensions still shifting by the hour, major banks are holding off on revising their long-term forecasts.
Goldman Sachs said it is maintaining its current outlook, predicting Brent crude at $66 per barrel and WTI at $62 per barrel by the fourth quarter.
For now, the oil market remains on edge—swinging sharply between fear and hope as the world watches the Middle East conflict unfold.
