Oil plunges as Trump postpones military strikes against Iranian energy infrastructure.
Oil prices dropped more than 13 percent on Monday after US President Donald Trump said he will order the military to postpone any strikes against Iranian power plants and energy infrastructure for five days.
Trump’s move followed a threat by Iran to attack Israel’s power plants and those supplying US bases across the Gulf region if the US targets its power network.
After the initial plunge, Brent crude was hovering around the $100-a-barrel price at 2:24pm Saudi time, down 10.28 percent, or $11.53. US West Texas Intermediate was down 10.68 percent, or $9.42, to $88.36 a barrel.
On Saturday, the US president threatened to “obliterate” Iran’s power plants if it did not fully reopen the Strait of Hormuz within 48 hours, barely a day after he talked about “winding down” the war, now in its fourth week.
In a social media post on Monday, Trump said: “I HAVE INSTRUCTED THE DEPARTMENT OF WAR TO POSTPONE ANY AND ALL MILITARY STRIKES AGAINST IRANIAN POWER PLANTS AND ENERGY INFRASTRUCTURE FOR A FIVE DAY PERIOD, SUBJECT TO THE SUCCESS OF THE ONGOING MEETINGS AND DISCUSSIONS,“
Prior to the announcement, Iran’s Parliament Speaker Mohammad Baqer Qalibaf wrote on X that critical infrastructure and energy facilities in the Middle East could be “irreversibly destroyed” if Iranian power plants were attacked.
“It clearly means more escalation, which means higher oil prices. Some are incorrectly thinking, however, that Iran may cave,” said Amrita Sen, founder of Energy Aspects.
“Trump is trying to show he can out-escalate and that way ends in scorched earth for Gulf infrastructure.”
The crisis in the Middle East is “very severe” and worse than the two oil shocks of the 1970s put together, Fatih Birol, the executive director of the International Energy Agency, said on Monday.
The war has damaged major energy facilities in the Gulf and nearly halted shipping through the Strait of Hormuz, which handles about 20 percent of global oil and liquefied natural gas flows.
Analysts estimated a loss of 7 million to 10 million barrels per day of oil production in the Middle East.
Iraq has declared force majeure on all oilfields developed by foreign oil companies, three energy officials said.
Crude production at Basra Oil Co. has been cut to 900,000 bpd from 3.3 million bpd, Iraqi Oil Minister Hayan Abdel-Ghani said in a statement issued by his ministry.
Source: Oilprice