Menu

Today's spike in oil prices probably shows that the market has dismissed President Trump’s recent statements as a strategic move to control energy costs. Even though the President claims productive negotiations are underway, the reality remains the same: Tehran officially denies any talks, and the core issues of the conflict, including the blockade of the Strait of Hormuz, continue uninterrupted.

President Trump announced a five-day delay on U.S. military strikes against Iranian energy infrastructure following "productive" talks with Iran. In a post on Truth Social, he described the conversations as positive and indicated he had instructed the Pentagon to postpone the strikes, contingent on the success of ongoing discussions.

However, Iranian and Arab officials expressed scepticism about the chances of success for Trump’s diplomatic push, saying it appeared to be an attempt to dampen oil prices, which fell sharply after the president said there was progress in the talks, according to the Wall Street Journal.

Arab officials said they have been talking separately with both sides, but that Iran has set a high bar for ending hostilities that is preventing discussions from gaining traction, according to the Journal.

Iran’s Foreign Ministry earlier denied talks with the U.S., IRIB reported. “Yes, there are initiatives from regional countries to reduce tensions, and our response to all of them is clear: We are not the party that started this war, and all these requests should be referred to Washington.”

President Trump seems unable to find a viable way out of the conflict (assuming he wants to) without achieving a key strategic goal. Whether it's failing to weaken Iranian missile capabilities, falling short of regime change, or struggling to reopen the Strait of Hormuz, which stayed open before the war, the administration has lacked a clear victory. As a result, the most straightforward approach has been to try market manipulation, aiming to artificially lower oil prices despite little progress on the ground. On the other hand, the Iranian side doesn't want to end the war before ensuring that it will never happen again, especially during Trump's term.

Recognising that the operational situation remains unchanged despite President Trump’s claims, market participants are shifting their focus to the growing risks posed by the next phase of the conflict. Specifically, the potential for broader targeting of regional energy infrastructure poses a threat that could take years to resolve and could keep oil and gas prices high for longer. For instance, recent Iranian strikes on the Ras Laffan complex have already incapacitated 17% of Qatar’s liquefied natural gas export capacity, resulting in estimated annual revenue losses of $20 billion and creating a long-term supply vacuum for European and Asian markets.

In the absence of a tangible shift in the military landscape, the prevailing market trend is unlikely to reverse. President Trump’s statements currently serve only to delay the inevitable realisation of the war’s impact, further distorting natural market mechanisms. The only factor capable of reversing the upward price trajectory may be the manifestation of the conflict’s broader economic consequences, specifically heightened fears of stagnant global growth or a looming recession.

Today’s S&P Global Flash PMI surveys may provide the first definitive signals regarding the impact of surging energy costs on corporate sentiment and industrial outlooks. Should the data reveal a significant negative surprise or a sharp spike in business pessimism, oil prices could encounter their first authentic and crucial bearish headwind.

Samer Hasn is a Senior Market Analyst at XS.com.