Crude oil prices pulled back on Hyperliquid as the US and Iran paused their recent attacks. The West Texas Intermediate (WTI) dropped to $86.82 from last week’s high of $93, while Brent, the global benchmark, fell to $98. So, is this the start of a new retreat?
US and Iran paused their strikes
Crude oil prices retreated on Hyperliquid, the top perpetual futures trading platform, as Trump paused his strikes against Iran. According to Axios, the pause is because Trump is providing room for diplomacy and a recognition that a return to combat operations was not effective in pushing Iranians back to the negotiating table.
Trump has had reneged on some of the recent threats. In a recent statement, he warned that the US would escalate its attacks against Iran if it did not come to the table to negotiate. Precisely, he warned that he would start to target Iran’s bridges and power plants without the caveat.
In a statement last week, he introduced a caveat, warning that the US would strike these targets whenever Iran attacked ships crossing the Strait of Hormuz.
During this war, Trump has made several big threats and failed to execute them. A few months ago, he warned that the US would bomb Iran’s bridges and power plants and bring the country back to the Stone Age, “where they belonged.”
Trump also created his “bridges and power plants” week and failed to implement it. As a result, markets created the term TACO, which stands for Trump Always Chickens Out.
TACO is one of the top reasons why oil prices have not surged higher during this war as investors are aware that Trump does not always follow through his threats.
China is pushing both sides to negotiate
Analysts suspect that Trump is under pressure to negotiate with the Iranians. For example, there are reports that China is pushing the US to go back to the negotiating table.
China has leverage on both sides. It has friendly relations with Iran and is believed to be supplying it with targeting information. On the other hand, China has reduced its oil purchases substantially in the past few months, which has helped Trump by not pushing oil prices higher than predicted. In a recent statement, Trump said:
“We’re talking to the Iranians right now. I think they’re getting more and more serious as the days go by. We’re locked and loaded and ready to go, but we’re talking to them.”
Still, there are substantial risks ahead. Ansar Allah may escalate its attacks against Saudi Arabia and close the Bab al-Mandeb Strait. Such a move will affect over 8 million barrels of oil.
Also, there is a risk that the US and Iran will escalate their attacks in the near term. Iranian officials believe that they have an upper hand as evidenced by the recent memorandum of understanding.
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