Trump’s “TACO” trade weighed on Brent crude futures, though Iran’s continued aggression and expectations of prolonged disruption in the Strait of Hormuz provided a floor to prices.
The crude futures rally has paused after a record run in March, with U.S. President Donald Trump’s hint at a potential stoppage of the more than a month-long war proving bearish for the energy commodity.
The Intercontinental Exchange (ICE)-traded Brent contract for June delivery pulled back to as low as $98.7 a barrel. But the contract has recouped the losses since then and traded nearly flat at nearly $104 a barrel in early New York session.
June Brent Crude Futures 24-hour Chart
Source: ICE
The West Texas Intermediate (WTI)-grade crude futures trading on CME’s NYMEX was down over 1% at a little over $100 a barrel. The contract plunged to a low of $96.50 in the Asian session
Record-Breaking Surge: The retreat, however, came after a record, breathtaking run in March. The May contract settled Tuesday’s session at $118.35 a barrel, up more than 60% for the month. This marked the highest close since June 2022. The monthly gain is also the biggest since the contract began trading in 1988.
After three down years, crude futures started the year on a firm note as the dollar weakened amid rate cut expectations. The rally gained ground in March after the U.S. and Israel launched strikes against Iran on Feb. 28, targeting the country's nuclear program and key energy infrastructure. The attack and counter attacks that followed and the resultant blockade of the Strait of Hormuz chokepoint were responsible for the spike in energy prices.
Trump Relents: After dilly-dallying about the U.S. approach toward the war, U.S. President Donald Trump has now signaled the end of the country’s mission in the Middle East, called “Operation Epic Fury.” Speaking from the Oval Office on Tuesday, Trump said, “We have had regime change. Now, regime change was not one of the things I had as a goal. I had one goal: they will have no nuclear weapon, and that goal has been attained. They will not have nuclear weapons. But we’re finishing the job, and I think within maybe two weeks, maybe a couple of days longer, to do the job. But we want to knock out every single they have.”
He also left open the possibility of a deal being struck before that.
The president would address the nation to provide an update on Iran at 9 p.m. ET on Wednesday, White House Press Secretary Karoline Leavitt said in a post on X.
Parallely, China and Pakistan jointly called for an immediate ceasefire and for shipping through Hormuz to be safeguarded.
Iran Keeps at it: Despite the Olive branch from the U.S., Iran has continued its offensive against the U.S. and its Gulf allies. The Qatari Defense Ministry stated that the country was targeted Wednesday, as Iran launched cruise missiles, one of which struck an oil tanker leased to Qatar Energy in Qatar's territorial waters.
Also, the pro-Iran Houthis claimed they launched a missile attack on Israel in coordination with Iran and Hezbollah.The outfit also warned that they are ready to escalate further if Israel continues its strikes across the region. The Houthis carried out their first batch of attacks, targeting sensitive military targets of Israel last weekend, opening a third front in the war.
ING Commodity Strategists Ewa Manthey and Warren Patterson warned of no immediate return to normalcy even if the war ends. “Even if the Strait reopens, clearing the vessel backlog would take time, with production, exports and LNG flows normalising only gradually rather than immediately,” Manthey and Patterson said.
The strategists also see Saudi Aramco raising the official selling price of Arab Light crude grade to Asian buyers next month.
Danish investment bank said the merely modest pullback reflected concerns that reopening the Strait of Hormuz may not be a prerequisite for a U.S. withdrawal. The firm also noted that refined fuel markets remain tight, with buyers of Brent cargoes still paying a premium of around $9 a barrel, above the front-month futures price near $103.50, underscoring ongoing supply stress.
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