WASHINGTON (dpa-AFX) - Crude oil plummeted on Tuesday after reports indicated that U.S. President Donald Trump was willing to wrap up the U.S. military offensive in Iran and push Iran to reopen the Strait of Hormuz through diplomatic efforts.
WTI Crude Oil for May delivery was last seen trading down by $1.28 (or 1.24%) at $101.60 per barrel.
Since the start of the U.S.-Israel versus Iran war on February 28, the Strait of Hormuz, which is a critical chokepoint for oil exports from Arab nations to the rest of the world, remains closed.
Several oil tankers are still stranded at the sea with no way to reach their destinations.
With transit crippled and storage difficulties increasing, a few Arab countries halted oil production and some scaled down the output drastically. The combined effect of production cuts and transit disruption has pushed oil prices higher.
As a consequence, inflationary concerns have been rattling the global economy, forcing central banks of major nations to curtail any rate-cut moves.
Yesterday, Trump warned that if Iran fails to lift off the blockade to the Strait of Hormuz, U.S. forces would decimate all power and energy installations and oil refineries in Iran and capture Kharg Island.
In the same note, Trump also acknowledged that the U.S. was engaged in serious discussions with reliable mediators to end the conflict.
In addition, more U.S. troops were deployed to the Middle East over the past few days. As war-threat increased, oil prices went up north.
Today, citing officials within the U.S. administration, the Wall Street Journal reported that Trump expressed willingness to end the military campaign against Iran and instead pressure Iran to open the Strait of Hormuz using diplomatic methods and was ready to let U.S. allies in Europe and the Gulf region to take up the responsibility of reopening the Strait of Hormuz if U.S.-Iran diplomacy fails.
This report from the WSJ indicating an end to the U.S. role in the current phase of Middle East war took off some heat.
Market participants shed the war jitters, leading to a cool-off in oil prices.
However, the ground-level situation remained tense. In an overnight attack, an oil tanker Al-Salmi connected to Kuwait and anchored off Dubai was struck by an Iranian drone attack.
Saudi Arabia intercepted two drones from Iran.
Meanwhile, the U.S.-Israeli attacks on Iran in the Isfahan province targeted some 'military sites.'
In an interview with Bloomberg today, Fereidun Fesharaki, Chairman Emeritus of the energy consultancy firm FGE NexantECA remarked that if the Middle East situation does not improve in the next six to eight weeks, oil prices could jump to $200 per barrel and even higher if the Strait of Hormuz remains near-closed as it is at the moment.
In the U.S., the average price of gasoline at the pump has topped $4.00 for the first time in nearly four years, with the national average hovering around $4.02.
Similarly, in the United Kingdom, average petrol prices have increased by 14.00% and diesel prices have surged by 27.00% since the war began.
Elsewhere globally, governments are struggling to keep fuel prices under control. Economists warn that a prolonged crisis could prompt discretionary spending cuts.
The U.S. dollar index was last seen trading at 99.99, down by 0.57 points (or 0.57%) today.
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