Oil prices experienced their most significant decline since October following indications from US President Donald Trump that he might delay military action against Iran. This development occurred after Iran pledged not to execute protesters, easing market anxieties about immediate conflict. West Texas Intermediate (WTI) crude oil plummeted by over 4 per cent, falling below $US60 a barrel, reversing part of a 10 per cent surge from the previous week. Brent crude also saw a substantial decrease, dropping 4.4 per cent to $US63.49 in New York trading.
Trump’s statements to reporters on Wednesday, in which he noted that the “killing in Iran is stopping” and warned against further crackdowns, significantly reduced the perceived risk of an immediate US military response. This also diminished concerns about potential disruptions to Iranian oil production and critical shipping routes in the region. The shift in sentiment followed reports that Iran’s judiciary had overturned the death sentence for Erfan Soltani, a 26-year-old who activists said was facing imminent execution.
Further reinforcing the expectation of de-escalation, the US Treasury Department announced sanctions targeting Iran’s Secretary of the Supreme National Security Council and 18 other individuals and entities allegedly involved in a shadow banking network. According to John Evans, an analyst at brokerage PVM, the recent rally in oil prices was largely driven by developments in Iran, but the situation has since taken a “much less anxious turn overnight.” He added that “the ladder of risk premium has been lost.”
