Oil Pulls Back Hard, But Hormuz Risk Still Sets the Floor
The core reason oil prices plunged was that President Trump signalled the U.S.-Israeli military operation against Iran was far ahead of schedule and largely complete. He claimed the campaign had struck 5,000 targets, reduced Iran’s missile capability by 90%, and cut drone launches by 83%, while describing the country as being left with little effective navy, air force, or communications infrastructure.
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Duration Risk Got Repriced Overnight
That reaction makes sense. Oil had been trading on fear that the conflict could drag on, damage infrastructure further, and keep key export routes under pressure. Once Trump signalled that operations were progressing faster than expected, part of that war premium came out of the market. Reuters reported Brent fell more than 7% on Tuesday, while AP said crude dropped below US$90 after earlier spiking close to US$120.
Trump also signalled a willingness to use policy levers to stabilise supply. The U.S. issued a 30 day waiver allowing already loaded Russian oil cargoes to be sold to India, and the administration has flagged that Strategic Petroleum Reserve releases, including coordinated action with allies, remain on the table. At the same time, G7 countries have discussed a possible joint reserves release, although no specific program has been confirmed yet.
The big risk, though, has not disappeared. If the Strait of Hormuz stays disrupted, analysts still warn oil could spike sharply again, potentially toward US$150 a barrel in a severe supply shock scenario. So the selloff was really the market unwinding some of the immediate fear premium, not declaring the oil risk fully gone.
