Oil prices dropped sharply on Tuesday, losing more than $10 per barrel after surging to a near four-year high in the previous session. The decline followed comments from U.S. President Donald Trump suggesting that the conflict in the Middle East could end sooner than expected, easing concerns about long-lasting disruptions to global oil supply.
Brent crude futures fell by $10.45, or 10.6%, to $88.51 per barrel by 1504 GMT (11:04 a.m. EDT). At the same time, U.S. West Texas Intermediate (WTI) crude dropped $10.61, or 11.2%, to $84.16 per barrel.
A day earlier, oil prices had surged above $119 per barrel, reaching their highest level since mid-2022. The rally was fueled by supply cuts from Saudi Arabia and other major producers, which raised fears of significant disruptions to global energy markets.
However, prices retreated after Trump and Russian President Vladimir Putin reportedly held a phone conversation and discussed proposals aimed at reaching a quick resolution to the conflict, according to a Kremlin aide.
Speaking in a CBS News interview on Monday, Trump said he believed the war with Iran was “very complete” and noted that Washington was progressing much faster than his initial four- to five-week timeline.
According to Suvro Sarkar, energy sector team lead at DBS Bank, Trump’s remarks helped calm market sentiment. He noted that while oil prices had overreacted to the upside earlier, the current sharp decline may also represent an overcorrection.
Analysts also cautioned that even if the conflict ends soon, global oil supplies will not immediately recover. Simon Flowers, chairman and chief analyst at Wood Mackenzie, explained that restarting disrupted supply chains can take time.
While refined products stored at refineries or ports could be shipped relatively quickly, oil wells that have been shut down for extended periods may require weeks or longer to return to full production levels.
Meanwhile, Iran’s Islamic Revolutionary Guards Corps warned that Tehran would block regional oil exports if U.S. and Israeli military strikes continue. State media reported that Iran would not allow “one litre of oil” to leave the region under such circumstances.
At the same time, Trump is reportedly considering easing sanctions on Russian oil and potentially releasing emergency crude reserves to help stabilize global prices, according to several sources.
Priyanka Sachdeva, an analyst at Phillip Nova, said that discussions about easing Russian oil sanctions, combined with Trump’s signals that the conflict could eventually de-escalate and the possibility of G7 nations tapping strategic reserves, all point to the likelihood that oil supply will continue reaching global markets.
However, G7 energy ministers stopped short of announcing a coordinated release of strategic oil reserves during a call on Tuesday.
Saudi Aramco, the world’s largest oil exporter, also warned that continued disruption of shipping routes through the Strait of Hormuz could have severe consequences for global oil markets.
JPMorgan analysts added that policy responses may have limited influence on oil prices unless safe navigation through the Strait of Hormuz is guaranteed. According to the bank, potential supply losses could reach as much as 12 million barrels per day over the next two weeks if disruptions intensify.
In another development affecting global energy supply, Abu Dhabi’s state oil company ADNOC shut down its Ruwais refinery after a fire broke out within the complex following a drone strike, according to a source familiar with the matter.
Despite the ongoing volatility, Goldman Sachs said it is maintaining its oil price outlook, forecasting Brent crude at $66 per barrel and WTI at $62 per barrel in the fourth quarter, citing the still-uncertain geopolitical situation.
