Oil prices experienced a decline on Monday morning following President Donald Trump’s announcement that the United States would refrain from targeting Iran’s energy infrastructure amidst ongoing constructive dialogues between the two nations. The West Texas Intermediate, a key North American benchmark, saw a drop of over nine percent, trading below $90 US per barrel, while stock markets surged at the beginning of trading sessions.
At market close, the S&P 500 had increased by 74.52 points to reach 6,581.00. The Dow rose by 631.00 points, equivalent to a 1.4 percent gain, closing at 46,208.47, and the Nasdaq composite climbed by 299.15 points, or 1.4 percent, to settle at 21,946.76. Additionally, the S&P/TSX composite index showed a rise of 566.40 points, reaching 31,883.81.
President Trump disclosed a five-day postponement of strikes on Iranian power plants, citing fruitful discussions between the two nations aimed at resolving hostilities in the Middle East completely and amicably. Oil prices have surged by approximately 50 percent since the onset of the Middle East conflict earlier this month.
This recent statement by Trump stands in stark contrast to his weekend remarks, where he issued threats of escalation via the Truth Social platform, warning of potential military action if Iran failed to open the Strait of Hormuz without coercion within 48 hours.
In response, Iran’s Islamic Revolutionary Guard Corps declared its intent to fully close the Strait of Hormuz should the U.S. target Iranian energy facilities. Trump has outlined military goals for the conflict with Iran, including the degradation or destruction of Iran’s military capabilities, defense infrastructure, and nuclear program, alongside safeguarding American allies in the region.
Energy prices have surged in recent weeks due to Iran’s restrictions on access to the vital Strait of Hormuz, a critical passage for exporting 20 percent of the world’s oil, as well as other energy products. Analysts from energy consultancy Wood Mackenzie have suggested that oil prices could potentially reach $200 per barrel in 2026 if Gulf exports face prolonged disruptions.
Kurt Barrow, an oil, fuels, and chemicals analyst at S&P Global, anticipates that it may take several months to restore equilibrium in energy markets once the conflict subsides. He highlighted the energy crisis transitioning into a demand and availability issue, with a deficit of approximately 15 million barrels per day across various fuel types.
The North American oil industry is presently navigating uncertainties, with concerns that excessively high oil prices could dampen demand in case of a global economic downturn. Industry experts emphasize the gravity of the situation and the challenges posed by prolonged high oil prices, emphasizing the need for responsible actions in the current energy landscape.
Trump’s social media post about potential strikes coincides with the fourth week of the conflict with Iran.