Oil prices fell sharply from recent peaks, helping lift global stock markets after comments from US President Donald Trump suggested the US Israel war with Iran could end “very soon.” The move capped a volatile stretch in markets, where fears about disrupted energy supplies had pushed crude to multi year highs and unsettled investors across regions most exposed to imported fuel.
Brent crude, the international benchmark, rose as high as $119.50 a barrel on Monday as concern intensified around the conflict’s impact on production and shipping across the Middle East. By late Monday, Brent had dropped to around $91.70 a barrel after Trump described the war as “very complete, pretty much” in an interview, easing immediate pressure on risk assets.
Stocks Rebound as Energy Shock Cools
European equities opened higher on Tuesday, with the FTSE 100 up about 1.4% early in the session. The broader Stoxx Europe 600 rose about 1.5%, reflecting a shift in sentiment as investors recalibrated the probability of a prolonged disruption to oil and gas flows.
Markets in Asia, which tend to be especially sensitive to higher energy costs, rallied overnight. Japan’s Nikkei 225 gained about 2.5% and South Korea’s Kospi jumped about 6%. Hong Kong’s Hang Seng finished higher by around 2%. The bounce followed sharp moves the prior day when oil surged and risk appetite weakened.
Analysts said the pullback in crude offered short term relief on inflation expectations, particularly for economies that import most of their energy. However, they also noted that market confidence remained fragile because the conflict’s underlying constraints, especially in shipping, have not been resolved.
Hormuz Risk Still Dominates the Energy Outlook
Despite the drop in crude, traders remain focused on the Strait of Hormuz, a critical chokepoint through which about one fifth of global oil and large volumes of seaborne gas typically move. The waterway has effectively been shut for about a week, amplifying the price response and reinforcing fears of shortages for key consuming regions.
Trump underscored that risk in social media remarks warning of a far stronger US response if Iran interferes with the flow of oil through the strait. Iranian state media, citing a spokesperson for the Revolutionary Guards, reported Tehran’s warning that it would not allow “one litre of oil” to be exported from the region if US and Israeli attacks continue.
Those statements highlight why oil prices can fall quickly on perceived de escalation signals but remain elevated relative to pre conflict levels. Even after Tuesday’s retreat, crude is still trading roughly 25% above levels seen a few weeks earlier.
Sanctions Signals Add Another Layer of Uncertainty
Alongside comments about the war’s trajectory, Trump also indicated Washington could waive some oil related sanctions to ease shortages. He told reporters the US would lift sanctions on some countries “until the strait is up.” The remarks came shortly after he spoke with Russian President Vladimir Putin, raising questions about how any sanction adjustment might interact with US efforts to pressure Moscow over the war in Ukraine.
The policy direction matters for energy markets because it can change the availability of supply at the margin, influence trade routes, and affect shipping insurance and financing. Investors are weighing whether temporary relief measures would materially ease tightness in the near term or whether practical constraints, such as physical disruption and transport risk, will remain dominant.
Governments Move to Cushion Consumers
Governments across Europe and Asia have begun taking steps to limit the economic damage from higher fuel costs and uncertain supply. In recent days, Croatia, Hungary, South Korea, and Thailand have imposed fuel price caps to reduce the risk of shortages and contain consumer costs.
Other measures have focused on conserving energy use. The Philippines ordered public officials to cut back on air conditioning and reduce travel. Bangladesh moved to close universities and bring forward Eid al Fitr holidays as part of emergency measures aimed at conserving electricity and fuel.
Market participants said these actions reflect how quickly energy price spikes can feed into broader inflation and growth concerns. Even if crude stabilizes, elevated transport and input costs can ripple through supply chains and consumer prices, particularly if disruption persists longer than expected.
For now, the sharp oil pullback has eased immediate pressure on stocks and helped calm inflation fears. But with the Strait of Hormuz still a focal point and sanctions policy in flux, investors remain alert to fresh headlines that could quickly reverse the mood.
