Sopuruchi Onwuka

Iran’s signal to walk back from double war fronts after 12 days of aerial war with Israel and a fierce confrontation with the United States over debilitating blasts at its nuclear facilities is beginning to settle nerves at the international energy markets where price of crude oil had jumped during the battles.

Oil prices took a dive on Monday after Iran’s retaliatory strikes on the US, signaling a possible desire from Iran to de-escalate by inflicting minimal damage to US infrastructure in the region.

In the aftermath of the attacks which subsided on Monday, Brent crude climbed down below the $70 market after it had earlier surged to nearly $78 per barrel as all sides in the conflict maintained tough positions.

President Trump also urged on Arab oil producers to pump more crude amid fears that Iran might close critical shipping lane through which some 15 million barrels per day of Arabian crude flows into the global oil market.

The Strait of Hormuz is between Oman and Iran, and about 20 million barrels of oil per day, or around 20% of the world’s oil consumption, passed through the strait in 2024. Most of that oil goes to Asia.

The Islamic republic flaunts a fleet of fast-attack boats and thousands of naval mines as well as missiles that it could use to make the strait impassable, at least for a time.

If Iran blocked the strait, oil prices could shoot as high as $120-$130 per barrel, at least temporarily, said Homayoun Falakshahi, head of crude oil analyst at Kpler, in an online webinar Sunday.

Trump on Monday called for the U.S. and other oil-producing economies to step up production as the White House sharpened its warnings to Iran against closing the Strait of Hormuz in retaliation for the U.S. strikes on Iran’s nuclear program.

Market analysts at Rystad Energy stated in an advisory on Tuesday that energy markets are still pricing the potential de-escalation.

Hopes returned after both Iran and the United States toned down their altercations over Iran’s nuclear programmes and expressed desire to return to peaceful negotiations that would restore peace in the Middle East after two years of wars sparked off by Hamas invasion of Israel on October 7, 2023.

Oracle Intelligence reports that oil market pundits have maintained a steady gaze on developments in the Middle East since the Hamas’ attack on Israel and the Israel’s counteroffensive which steadily drew Iran and the United States closer to the battle theatre.

With the American show of overwhelming force in a one-off attack at the weekend and Iran’s ceremonial response with calculated strikes at US military facilities in Qatar, all parties in the conflict have indicated willingness to deescalate.

President Trump revealed in a public statement that Iran gave US advanced warning of attacks on base in Qatar.

“I want to thank Iran for giving us early notice, which made it possible for no lives to be lost, and nobody to be injured,” Trump wrote on social media.

The president expressed hope that the missile would be the end of Iranian retaliation for U.S. strikes on Iranian nuclear sites. There were no attack on US base in Iraq, senior US military official was quoted as saying.

“Most importantly, they’ve gotten it all out of their ‘system,’ and there will, hopefully, be no further HATE,” he said, indicating that communication for ceasefire had taken place between the warring parties.

President Trump also stated that Israel and Iran have agreed to a “complete and total ceasefire” to be phased in over 24 hours.

Trump said on Truth Social that the ceasefire would bring an “Official END” to war, a major change in the hostilities that follows a U.S. strike over the weekend on three Iranian nuclear sites.

“On the assumption that everything works as it should, which it will, I would like to congratulate both Countries, Israel and Iran, on having the Stamina, Courage, and Intelligence to end, what should be called, “THE 12 DAY WAR,” Trump posted.

Iran on Tuesday strongly denied that it launched another attack on Israel just as the Tel Aviv threatened to resume war with the Islamic Republic. The prompt denial by Iran strikes a differing note from its earlier posture of gloating over damages in Israel. It also conforms to the peace process brokered by the United States.

Tension in the oil market is further addressed by the call by Trump on oil producing nations, especially the US players, to step in and tame oil prices, saying that keeping production down would play into Iran’s plans of global market disruption.

 “To the Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!”

“EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!” Trump posted on social media.

 Following the latest developments, oil prices tumbled on Monday.

Vice President in charge of Oil Markets Analysis at Rystad Energy Janiv Shah, noted that the geopolitical risks that have loomed over the Middle East for months have now fully materialized, prompting a rapid repricing in the oil market.

“If Iran’s counterstrike is viewed as a de-escalation move, the likely case remains for the Strait of Homultz to remain open,” noted.

Rystad’s Senior Analyst in charge of Gas & LNG Research, Lu Ming Pang, stated that quick resolution of the crisis and aversion of channel closure means that some 20 percent of global LNG cargoes originating from Qatar and the UAE would continue to flow towards Asia.

So far in the year, Qatari and UAE LNG are responsible for 34 percent of imports by China; 16% reliance for South Korea; 21 percent imports by Thailand; 5.61 percent imports by Japan; 66 percent imports by India; and 69.2 percent import by Bangladesh.

However, since all LNG exports from Qatar and the UAE must pass through this route, and given their relatively cooperative ties with Iran, both countries are expected to work to keep LNG shipments uninterrupted.

Rystad is if the opinion that the importance of geostrategic, “unchokeable” LNG supplies sources has grown as countries prioritize energy security amid rising geopolitical tensions.

“For OECD importers across Asia, Europe, and South America, LNG that avoids key maritime choke points or disputed territories may become increasingly attractive, helping to mitigate shipping risks and potential cost surges in the wake of the latest conflict,” Rystad stated.

Overall, Iran’s retaliatory response is now being perceived as a possible de-escalation move, with oil prices falling as energy markets react to a fluid situation. Secondary attention will turn to reactions across the Muslim world and among Iran’s traditional allies, including Russia and China, Rystad stated.

If true that Iran’s nuclear stockpile and associated facilities have been destroyed, it  would significantly weaken Iran’s military capabilities, potentially pushing the conflict toward a negotiated nuclear deal and eventually peace. Such an outcome would reduce the likelihood of damage to oil and gas infrastructure, easing geopolitical risk premiums embedded in energy prices.

In the scenario that Iran managed to secure its nuclear assets ahead of the strikes, further US-Israel military action becomes highly probable and heightens the risk to regional oil and gas infrastructure and drive prices higher as risk premiums rise.

The Oracle Intelligence reports that the war still leaves vestiges of industry and market disruption including GPS jamming, cyber interference, and rising insurance premiums for commercial vessels.