Trump’s “Forecast” of End of War Cools Oil Market With Single-Day Pullback of Nearly $40. Analysts: Control Over Oil Prices Still Lies in the Strait of Hormuz

TradingKey - On Monday (March 9) ET, Trump stated in an interview that the US-Iran war is essentially over, causing crude oil prices to plunge on the news. WTI and Brent crude futures both approached a high of $120 that day, but driven by this news, they briefly dropped to the $80 mark.

TACO is back! Trump aggressively strikes oil prices

Trump stated that military operations against Iran have been very thorough, with Iran's navy, air force, communication facilities, missiles, and drones almost entirely destroyed, noting that the progress of the war has been much faster than his initial estimate of 4 to 5 weeks.

To counter surging oil prices, Trump announced that the US is temporarily waiving certain oil-related sanctions to ensure adequate supply and lower prices until the Strait of Hormuz returns to normal. It is understood that the US issued a 30-day temporary waiver last week, allowing Russian oil currently stranded at sea to be sold to India.

Recently, the Trump administration has discussed a series of measures to suppress oil prices, including releasing emergency reserves, suspending federal gasoline taxes, and Treasury intervention in the crude oil futures market. However, suspending taxes requires Congressional approval, releasing emergency reserves faces operational hurdles, and the effectiveness and mechanism of Treasury intervention in futures markets remain questionable.

At Monday's G7 meeting, finance ministers stated that all parties are prepared to release oil reserves but have "not yet reached an agreement on the matter," with the US supporting a release of up to 400 million barrels of crude oil.

Analysts believe the core reason for Trump's sudden shift from aggressively striking Iran to controlling oil prices is that surging prices would heighten inflationary pressures in the US, leading to risks of stagflation.

Furthermore, Bank of America Chief Investment Strategist Michael Hartnett pointed out another significant reason: Trump needs to consider the midterm elections. Hartnett noted that since the conflict began, US oil has surged 45% and gasoline prices have risen 15%; the inflationary pressure driven by oil is being transmitted directly to average voters, pushing Trump's economic approval rating down to 40% and his inflation approval rating to a low of 36%.

Is the crude oil plunge an overreaction? "Ceasefire" is only one side of the story!

Despite signs of a perceived de-escalation in the conflict, analysts believe that oil prices will ultimately depend on the duration of the Middle East conflict and the extent of the disruption in the Strait of Hormuz. In other words, crude oil fundamentals will not change until the conflict is fully resolved and security in the Strait of Hormuz is restored.

Bob McNally, president of consulting firm Rapidan Energy Group, stated that while other options may exist to mitigate surging oil prices, none can offset the impact when one-fifth of global oil transport is blocked in the Strait of Hormuz, nor can any option substitute for the contribution of reopening the Strait to price stability.

Additionally, Iran responded to the US claim that the "war is essentially over" by asserting that the outcome will be decided by Iran and that the US military cannot end it. Iran took a hardline stance, stating that oil shipments will not resume if the US and Israel continue their attacks. Sources claim Iran will continue to fight until Trump admits defeat.

According to CNN, Iran is developing plans to impose "security fees" in the Persian Gulf on tankers and merchant ships belonging to countries allied with the US, stating that the Strait of Hormuz currently "remains closed," even as Trump claims it is open.

Diplomats noted that although Iranian leaders have been removed, there are no signs of serious fractures or institutional collapse. The key reason lies in the structure of the Iranian regime: it is not a simple top-down linear hierarchy; rather, the exercise of power relies heavily on representatives of the Supreme Leader—officials stationed at the grassroots level. This network-like power structure means that even if changes occur at the top, the system remains operational at the base. Consequently, as long as Iran's grassroots organizations are not fully dismantled, the US-Iran conflict will remain at a stalemate, keeping oil prices high.