Brent Crude Steadies Above $110 After Trump Halts Iran Attack

A de-escalation in US-Iran tensions brought a fragile calm to oil markets, but underlying supply risks and inflation fears continue to keep traders on edge.

Global oil prices stabilized after a volatile session, with Brent crude holding above $110 a barrel, after President Trump announced he called off a planned military strike against Iran to favor diplomatic negotiations. The move pulled crude back from a 2% slide, though persistent inflation concerns and tight global supplies kept a floor under prices.

"The oil market continues to trade in wide ranges, and it remains extremely sensitive to Iran-related headlines," analysts at ING said. "ICE Brent traded almost in a $6/bbl range yesterday."

Brent crude for July settlement fell 1.6% to $110.32 a barrel in early European trading, while West Texas Intermediate futures declined 0.5% to $103.90. The U.S. dollar, a safe haven, initially strengthened on the news but later saw the DXY index slip 0.1% to 99.098. In bond markets, the 10-year U.S. Treasury yield rose 1.8 basis points to 4.608%, reflecting lingering inflation worries.

The market's sharp reaction highlights the significant geopolitical risk premium embedded in current oil prices. While the immediate threat of military conflict has receded, the underlying dispute over Iran's nuclear program and the effective closure of the Strait of Hormuz mean supply disruptions remain a critical threat, complicating the global inflation outlook for central banks.

The decision to pause military action came after requests from Gulf allies, according to the President's statement. This introduced a degree of stability, but the market's focus is quickly shifting back to fundamental supply and demand. Inventories are being drained at the fastest pace outside of a major emergency, according to reports. Adding another layer to the supply puzzle, the U.S. extended a sanctions waiver allowing the purchase of Russian oil for another 30 days, a move expected to be welcomed by Asian buyers.

The volatility in energy markets is having a direct impact on other asset classes. European equities struggled, with Germany's DAX falling as higher energy prices fueled inflation fears. Gold, another traditional safe haven, saw its upward momentum stall, with futures down 0.2% to $4,549.30 an ounce as the stronger dollar and expectations of higher interest rates provided headwinds. "Escalating tensions can weigh on gold through higher yields and a stronger dollar, while any credible path toward de-escalation or peace may ultimately support prices,” analysts at Saxo Bank noted.

This article is for informational purposes only and does not constitute investment advice.