Global oil prices retreated sharply on Tuesday after US President Donald Trump signalled that the conflict with Iran could wind down sooner than expected, easing fears of a prolonged disruption to energy supplies from the Middle East. International oil benchmark, Brent North Sea crude, plunged 9.6 per cent to $89.44 a barrel, a day after it neared $120, reversing part of last week’s sharp rally that had pushed prices close to triple-digit territory amid escalating military tensions and concerns over the security of energy shipments through the Strait of Hormuz.
The decline came after Trump said in a phone interview with CBS News that the US military operation against Iran had been “very complete” and was progressing faster than initially anticipated.
“We are well ahead of the four-to-five-week timeline,” Trump said, adding that Iran’s naval capabilities, communications systems and air force had been severely weakened during the conflict.
Markets interpreted the remarks as a signal that the conflict might not escalate into a prolonged regional war that could threaten global oil supplies.
The easing of geopolitical risk immediately removed part of the “war premium” that had been priced into crude markets over the past week.
Despite Tuesday’s decline, oil prices remain elevated compared with levels seen before the conflict intensified.
Analysts say the market is still pricing in significant uncertainty surrounding the stability of energy flows from the Gulf region, particularly shipments moving through the Strait of Hormuz — the world’s most important oil transit chokepoint.
The narrow waterway between Iran and Oman handles around 20 per cent of global seaborne crude and liquefied natural gas shipments, making it highly sensitive to geopolitical disruptions.
Last week, concerns about attacks on shipping and insurance withdrawals had pushed crude sharply higher, with Brent briefly approaching the $95–$100 range as traders rushed to hedge against potential supply shocks.
Energy analysts say Tuesday’s decline reflects a partial unwinding of those fears rather than a fundamental shift in supply conditions.
“This is largely a geopolitical premium coming out of the market,” said Vandana Hari, founder of Singapore-based energy consultancy Vanda Insights. “Prices surged on fears of disruption in the Gulf. When markets perceive that the conflict might stabilise, that risk premium begins to fade.”
However, she warned that the situation remains fragile.
“As long as tensions persist around the Strait of Hormuz, traders will remain cautious because the region accounts for such a significant share of global energy supply,” Hari said.
Shipping disruptions and insurance concerns have also contributed to market volatility.
Some tanker operators remain reluctant to send vessels through the strait without adequate war-risk insurance coverage, while several ships have reportedly delayed voyages as security risks remain elevated.
The uncertainty has added to volatility in energy markets already grappling with tight global supply balances.
According to the International Energy Agency, global oil demand is expected to exceed 103 million barrels per day in 2026, supported by strong consumption growth in Asia and the Middle East.
At the same time, spare production capacity among major producers remains limited, leaving markets vulnerable to sudden supply disruptions.
Energy market strategists say that even if the current conflict begins to de-escalate, geopolitical risks will continue to shape oil prices in the near term.
“Oil markets remain extremely sensitive to developments in the Middle East,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“Any sign of reduced tension will bring prices down quickly, but the underlying risk has not disappeared. Traders are still watching shipping activity and military developments very closely.”
Financial institutions have also warned that prolonged disruption in the region could still push oil significantly higher.
Some analysts have suggested that crude could surge toward $120 or even $150 a barrel if shipments through Hormuz are severely curtailed for an extended period.
For now, however, markets appear to be taking comfort from signals that the conflict might stabilise sooner than feared.
