Oil Falls as Trump Signals Restraint on Iran After Ship Attacks

By Nathan Brooks

Brent crude dropped 75 cents to $97.57 a barrel at 1011 GMT on Monday, a 0.75% decline, after US President Donald Trump said fresh attacks on Iran were “highly unlikely.” US West Texas Intermediate lost 38 cents, or 0.4%, to $90.45, even as attacks on ships near the Strait of Hormuz kept supply concerns in focus.

Brent had plunged 16% in the prior week, its steepest weekly decline since the start of the COVID-19 pandemic. Monday's smaller drop extended that rout as the market weighed the prospect of less military escalation, not the disappearance of shipping risks.

What does Trump's signal change for oil traders?

Saxo Bank analyst Ole Hansen said: “Oil continues to trade lower on hopes of a US-Iran peace deal rather than concrete signs of progress.” He said Trump's comments that fresh strikes were highly unlikely had added to pressure on prices.

For traders, the immediate change is a reduced expectation of another US attack while talks continue. It is not a clean signal that physical supply is secure. UBS analyst Giovanni Staunovo said: “Weakness in the physical market, supported by still-elevated flows out of the Middle East, is one factor weighing on prices.”

On Sunday, Trump said he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progressed. The US and Iran both reported that shipping had been hit in or near the Strait of Hormuz.

Trump had hinted at renewing attacks on Iran after last week's US midterm elections, but no sign of a large-scale US military operation had emerged. Iran said it would respond by striking US and Israeli targets.

Tim Waterer, chief analyst at KCM Trade, called Trump's comments “more measured.” He said the market was waiting to see whether the midterms had produced a lasting shift in Trump's approach to the conflict, or whether this was just another temporary change in tone.

JPMorgan sees a surplus widening into October

JPMorgan said in Friday's report that oil was headed for a glut again. Recovering Middle Eastern oil flows, rising production from other countries and weak demand had pushed global supply above consumption, the bank said.

JPMorgan estimated:

• A global surplus of 1.1 million barrels per day in September.
• A wider surplus of 1.4 million barrels per day in October.

Those estimates imply a 300,000-barrel-per-day increase in the projected surplus from September to October. That gives the bearish case a fundamental argument beyond Trump's comments, while Staunovo's observation about still-elevated Middle Eastern flows reinforces the physical-market weakness.

Shipping and refinery attacks keep risk active

Iran-aligned Houthis said they were responsible for a Sunday attack on Saudi Aramco's offices in Riyadh. Separately, Russia's Kirishi oil refinery was set on fire after a Ukrainian drone attack on the region on Monday, Governor Alexander Drozdenko said.

Those incidents kept geopolitical risk tangible even as both benchmarks fell. The ship attacks near the Strait had already put supply concerns back in focus, and they sat alongside JPMorgan's surplus estimate rather than replacing it.

For energy-market participants, lower benchmark prices are the immediate change, while shipping and production risks remain unsettled. The bearish case now rests on both Trump's restraint and JPMorgan's surplus forecast.

The next checkpoints are whether US-Iran talks sustain Trump's restraint, whether shipping near the Strait remains secure, and whether September's projected 1.1 million barrels per day of surplus outweighs any renewed disruption. Deterioration in any of those areas could challenge the bearish positioning now supporting lower prices, even as JPMorgan's forecast points to further downside.