Oil plunged by more than 11 per cent on Tuesday after the market held onto comments by US President Donald Trump about a quick end to the war with Iran that has disrupted global crude flows.
Brent futures fell $11.16 or 11 per cent to $87.80 a barrel, and the US West Texas Intermediate (WTI) crude settled at $83.45 a barrel, down $11.32 or 11.9 per cent. This was the steepest percentage drop of any session since 2022.
The American president, in an interview on Monday, said he thought the war against Iran was “very complete” and the US was “very far ahead” of his initial four- to five-week estimated time frame.
The market also followed US Energy Secretary Chris Wright, who wrote on X that the American military had facilitated a shipment of oil out of the Strait of Hormuz.
However, it was reported later that Iran has begun laying naval mines in the strategically vital strait, through which 20 per cent of crude flows pass.
Iran’s Islamic Revolutionary Guard Corps (IRGC), now sharing control of the strait with the regular navy, has a range of asymmetric capabilities, including scattered mine-laying craft, explosive-laden boats and shore-based missile batteries, giving it the ability to create a complex array of threats to passing vessels.
Disruptions in Hormuz have already had significant ripple effects as tanker traffic through the strait has plummeted with shipping companies avoiding the area and insurers hiking premiums amid risk, and analysts warn that prolonged disruption could trigger one of the largest energy shocks in decades.
It was also reported that President Trump was considering easing oil sanctions on Russia related to its war in Ukraine, and releasing emergency crude stockpiles to help curb spiking prices.
Market analysts noted that nearly 1.9 million barrels per day of crude refining capacity in the Gulf has been shut in due to the US-Israeli war on Iran.
Seeking to calm down soaring oil prices, G7 finance ministers have discussed a possible joint release of strategic petroleum reserves, up to potentially 400 million barrels. This will be facilitated by the International Energy Agency (IEA).
The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 1.7 million barrels in the week ending March 6, after adding 5.6 million barrels in the week prior. Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.