The price for a barrel of Brent crude fell 9.4% to $101.62, down from nearly $120 at one point last week, after Trump said the United States and Iran held productive talks the last two days “regarding a complete and total resolution of our hostilities in the Middle East.” The S&P 500 rose 1.2% toward its best day since the war began.
The market’s moves remain tentative, though, and Iran denied such talks took place. The S&P 500 trimmed its gain, which had reached 2.2% in the morning.
Over the weekend, Trump had threatened to “obliterate” Iran’s power plants if it doesn’t open up the Strait of Hormuz within 48 hours. The narrow waterway off Iran’s coast has become a sore point for Trump and the economy because its near-closure has prevented oil tankers from leaving the Persian Gulf to supply customers around the world.
Trump said Monday that he is postponing attacks on Iranian power plants for five days to allow talks to continue. Quickly afterward, Iranian state media cited Iranian officials as denying any talks like Trump described and said Trump had backed down “following Iran’s firm warning.”
The price of Brent crude fell as low as $96 immediately after Trump announced the postponement, but it quickly recovered a chunk of that loss. Benchmark U.S. crude had a similar reaction, immediately dropping toward $84 per barrel before yo-yoing back above $92 and then falling back to $89.30.
Financial markets have had vicious swings, both up and down, since the war began because of uncertainty about how long it may last. The fear is that a long-term disruption could keep so much oil and natural gas off global markets that it creates a debilitating wave of inflation for the global economy.
