Trump Comment on Iran Sends Brent Crude Plunging Over 7%

Brent crude futures plunged more than 7% Wednesday after President Trump said negotiations with Iran were in their “final stage,” triggering a rapid unwinding of the market’s geopolitical risk premium and sending the benchmark to a two-week low near $103 a barrel.

"There's renewed positive sentiment because oil prices are down, yields are down," said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. "But there is pessimism on the horizon because higher oil prices for longer put the Fed in a corner."

The sharp drop in oil prices coincided with a risk-on rally in broader markets, with the S&P 500 climbing 0.88% and the Nasdaq Composite adding 1.26%. In a flight from risk, the yield on the benchmark US 10-year note fell 8.2 basis points to 4.588% as fears of war-driven inflation eased.

The market’s violent reaction highlights the precarious balance of a trading logic dominated by the potential reopening of the Strait of Hormuz, which handles 20% of global oil supply. While any sign of de-escalation pressures prices, the underlying physical market remains historically tight, setting the stage for extreme volatility.

Bullish Inventory Data Overwhelmed by Geopolitics

The geopolitical sell-off completely overshadowed what would have otherwise been seen as an extremely bullish report from the US Energy Information Administration. The EIA data showed total US crude inventories, including the Strategic Petroleum Reserve, fell by a record 17.8 million barrels last week.

The draw included a 7.9 million barrel decline in commercial crude stockpiles, far exceeding analyst expectations for a 2.9 million barrel drop. The data was further supported by a surge in US crude exports to a record 5.6 million barrels per day. The figures underscore a physically tight market where demand is robust, yet this fundamental reality was swiftly cast aside. In the moments after the EIA data was released, Brent crude briefly pared its losses to trade near $107.40, down less than 3.5%, before Trump’s comments sent prices spiraling downward to a session low of $103.24.

Strait of Hormuz Remains the Decisive Factor

The market's singular focus remains on the Strait of Hormuz. According to media reports, Iran’s Revolutionary Guards said 26 commercial vessels had transited the strait in the past 24 hours, a notable increase from previous weeks but still a fraction of the 138 vessels that cross on a normal day, according to BBC analysis. This partial resumption of traffic was enough to convince traders to shed risk premium.

However, many analysts believe the sell-off is a temporary reaction, not a structural trend reversal. The International Energy Agency confirmed in its May report that the world has seen a supply loss of 12.8 million barrels per day since the conflict began, describing it as the largest disruption in history. Global inventories have drawn down by a cumulative 250 million barrels in just two months. Against this backdrop, some analysts remain bullish. Citigroup maintains that Brent could retest $120 per barrel, while Wood Mackenzie has warned that a renewed full closure of the strait could send prices toward $200. JPMorgan’s forecast for Brent to average $96 in 2026 suggests a structurally elevated price floor remains, even if a peace deal is reached.

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