Oil prices fell on Thursday after the United States President, Donald Trump, backed down from threats of further attacks on Iran and claimed that a peace agreement was close.
According to The New York Times, oil prices had been volatile on Thursday morning after the United States and Iran exchanged fire for a second straight day, and Trump threatened that further attacks would come that evening, heightening fears that the two countries could slide back into broader conflict.
Trump’s abrupt shift in tone prompted a sharp reaction in oil prices. The price of Brent crude, the global benchmark for oil, fell more than 3 per cent to below $90 per barrel. It was $89.99 as of 7:30 p.m. Nigerian time on Thursday.
West Texas Intermediate crude, the US benchmark, also fell more than 3 per cent, trading at around $87 per barrel.
The New York Times said investors and analysts are focused on the continued disruption to shipping in the Strait of Hormuz, the narrow waterway between Iran and Oman that is a vital trading route for oil and natural gas and normally carries as much as one-fifth of the world’s oil supply.
Despite the escalating tensions, oil markets had remained relatively subdued in recent days, showing little reaction since the downing of a US Army Apache helicopter near the Strait of Hormuz on Monday.
“Based on the fact that discussions with the Islamic Republic of Iran have been brought to the highest level of Iranian leadership and approved, I have, as President of the United States of America, cancelled the scheduled strikes and bombings against Iran this evening,” Trump wrote in a post on Truth Social.
Trump said “discussions and final points” had been approved by the United States, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan, Egypt and others.
“The naval blockade will remain in full force and effect until this transaction is finalised – time and place of the signing to be announced shortly,” Trump said.