BY COMOFORT OGBONNA
Oil prices declined sharply on Tuesday after U.S. President Donald Trump announced that he had postponed a planned military strike on Iran, easing fears of an immediate escalation in the Middle East conflict and reducing concerns over a deeper disruption to global energy supplies.
The announcement triggered a pullback in crude prices after days of strong gains fueled by growing geopolitical tensions in the region. Investors reacted quickly to Trump’s statement that Washington would delay military action in order to allow more time for diplomatic negotiations aimed at ending the conflict.
In a post shared on social media Monday, Trump said the United States had paused an attack that had reportedly been scheduled for Tuesday. He added that discussions with Iran were continuing and warned that military operations could still resume if negotiations fail to produce an agreement.
Following the comments, Brent crude futures for July delivery dropped $1.62, or 1.45%, to trade at $110.48 per barrel by late morning trading. U.S. West Texas Intermediate crude for June delivery, which expires Tuesday, fell 76 cents to $107.90 per barrel, while the more actively traded July contract lost $1.10, or 1.05%, to $103.28.
Market analysts said the sharp decline reflected traders reacting to rapidly changing headlines surrounding the conflict rather than any lasting improvement in the broader geopolitical situation.
Ole Hansen, an analyst at Saxo Bank, said oil markets remain extremely sensitive to developments from the Middle East, with investors responding to every update related to the conflict between Iran, the United States, and Israel. According to Hansen, despite constant news flow and speculation, there has still been no concrete indication that the war is nearing an end.
The previous trading session had seen both Brent and WTI crude climb to multi-week highs. Brent reached its strongest level since May 5, while WTI touched its highest point since April 30 as fears over supply shortages intensified.
A major concern for global markets remains the situation surrounding the Strait of Hormuz, one of the world’s most important shipping routes for oil and liquefied natural gas. The waterway normally handles around one-fifth of global oil and LNG supplies each day. Ongoing conflict in the region has effectively disrupted activity around the strait, raising fears of one of the most severe energy supply shocks in recent years.
The International Energy Agency has described the disruption as the largest oil supply threat currently facing global markets. Energy traders remain on edge over the possibility that prolonged instability in the region could further tighten global supplies and push prices even higher.
Meanwhile, Iranian state media reported that Tehran has proposed a new peace framework to the United States. The proposal reportedly includes a halt to hostilities across several fronts, including Lebanon, the withdrawal of U.S. forces from areas near Iran, and compensation for damages caused during the conflict.
The diplomatic developments came as Washington continued applying economic pressure on Iran. The United States imposed fresh sanctions targeting an Iranian foreign currency exchange network as well as companies allegedly involved in handling financial transactions for Iranian banks. U.S. authorities also sanctioned 19 vessels accused of transporting Iranian oil and petrochemical products to overseas buyers.
At the same time, the U.S. Treasury Department extended a sanctions waiver for another 30 days, allowing certain countries considered vulnerable to energy shortages to continue purchasing Russian seaborne oil. The temporary extension aims to prevent additional strain on global energy markets already shaken by instability in the Middle East.
In Asia, the impact of the conflict is beginning to affect refining activity. Chinese state-owned refiners have reportedly reduced crude processing levels by more than one million barrels per day since the outbreak of the Iran conflict. Analysts and industry sources said disruptions to supply chains and weaker refining margins forced operators to scale back production.
Consultancy firm Energy Aspects estimated that Chinese state refiners are currently processing around 8.4 million barrels per day this month. That figure is down from 8.6 million barrels per day in April and significantly lower than the 9.5 million barrels processed in March. Before the conflict intensified following U.S. and Israeli attacks on Iran earlier this year, Chinese refiners had been operating at close to 10 million barrels per day.
The reduction in Chinese refining activity highlights how geopolitical instability is affecting not only supply routes but also fuel demand and industrial operations across major economies.
In the United States, government data showed that nearly 9.9 million barrels were withdrawn from the Strategic Petroleum Reserve last week, marking one of the largest weekly drawdowns on record. The release reduced total emergency stockpiles to roughly 374 million barrels, the lowest level since July 2024.
Analysts are also expecting another decline in U.S. crude inventories. Market forecasts suggest domestic crude stockpiles likely fell by approximately 3.4 million barrels during the week ending May 15. Investors are now awaiting official inventory figures from the U.S. Energy Information Administration, scheduled for release on Wednesday.
Despite Tuesday’s decline in prices, analysts warned that oil markets remain highly volatile and vulnerable to sudden swings as geopolitical tensions continue to dominate trading sentiment. Any signs of renewed military escalation or disruptions to key energy infrastructure could quickly reverse losses and send crude prices higher again.
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