Global oil prices dropped sharply on Tuesday morning after signs that the conflict involving Iran may not last long. The sudden development brought relief to global energy markets that had been shaken by fears of supply disruptions. Traders reacted quickly after Donald Trump suggested that the war could be short-lived and indicated that the United States may remove oil-related sanctions on some countries.
The fall came after oil prices had surged dramatically a day earlier. On Monday, Brent crude prices climbed to nearly $120 per barrel, the highest level since July 2022. The sharp rise was driven by concerns that the conflict could disrupt global oil supply. Such fears pushed markets into panic buying and caused prices to spike quickly.
By Tuesday morning, however, the market mood changed. At around 8:15 AM, the April Brent contract on the Intercontinental Exchange was trading at $89.36 per barrel. This represented a decline of about 9.70% from the previous close. At the same time, West Texas Intermediate (WTI) crude on the New York Mercantile Exchange was trading at $85.79 per barrel.
Oil Markets React to Signs of Shorter Conflict
Energy markets often react strongly to geopolitical tensions, especially when they involve regions that play a key role in global oil supply. The earlier surge in prices was mainly linked to fears that the conflict could affect oil shipments passing through the Strait of Hormuz.
The Strait of Hormuz is one of the world’s most important oil transport routes. A large share of global oil shipments passes through this narrow waterway. Any disruption to oil movement through the strait can quickly affect supply and push prices higher.
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Concerns grew after fears that the conflict could interrupt shipments through the route. This uncertainty pushed crude prices to multi-year highs on Monday.
However, the situation began to calm after Donald Trump told the media that the military operation was ahead of schedule. Although he said the conflict may not end within the same week, the remarks suggested it may not last as long as markets initially feared.
He also indicated that the US administration may remove oil-related sanctions. If sanctions are lifted, more oil could enter global markets. Higher supply generally helps lower prices, which explains the sharp reaction in crude markets.
At the same time, Donald Trump warned that if Iran disrupts oil flow through the Strait of Hormuz, the United States would respond with stronger attacks. The warning was aimed at preventing any disruption to global oil shipments.
Strategic Reserve Talks Among Major Economies
The sharp rise in oil prices earlier also triggered discussions among major economies about possible emergency measures. Countries in the Group of Seven (G7) discussed releasing oil from strategic reserves maintained by members of the International Energy Agency (IEA).
Reports indicated that there had been early consideration of releasing around 400 million barrels of oil from these reserves. Such a move could help stabilize global markets by increasing supply.
However, according to reports, the countries reached broad agreement not to release stockpiles immediately. Instead, they decided to keep the option available if the situation worsens.
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Officials said governments remain prepared to take necessary measures to support global energy supply, including releasing reserves if required.
India Focuses on Domestic Oil Demand
India is closely watching developments in global energy markets because the country imports nearly 90% of its crude oil requirements. This makes the economy highly sensitive to global price changes.
Government officials indicated that India is unlikely to participate in any coordinated release of strategic reserves. The main priority is to meet domestic demand.
During a similar situation in 2022 following the Russia-Ukraine war, India released oil from strategic reserves along with major economies to ease supply concerns.
In the current situation, officials said India does not have a direct role in the factors causing the price increase, and therefore participation in such a release is unlikely.
India’s External Affairs Minister Subrahmanyam Jaishankar addressed the issue in the Lok Sabha on Monday. He said the interests of Indian consumers remain the top priority and noted that Indian diplomacy has supported energy companies during the current volatile situation.
Estimates show that a $1 per barrel increase in crude oil prices sustained for a year can raise India’s annual import bill by about ₹16,000 crore.