Oil prices slip as stocks rise on Trump’s Ukraine war talks

Global Oil Market – (Web Desk) – Oil prices dropped on Tuesday. Most stock markets went up. This happened after reports suggested Donald Trump might be open to ending the war with Iran. And that’s true even if the Strait of Hormuz stays closed.

But investors are not fully relaxed yet. The same day that report came out, Trump threatened to destroy Iran’s main oil port and its water plants. He also hinted that talks were moving forward. So the mood was mixed.

People around the world are already feeling the pain of rising fuel costs. Governments are rushing to find ways to help. That pressure is real because one fifth of the world’s oil and gas flows through that narrow waterway.

The Wall Street Journal spoke to officials inside the administration. They said Trump and his team now believe that trying to reopen the Strait would take too long. It would push the mission well beyond his four to six week plan. So instead he wants to focus on hitting Iran’s missiles and navy first. Then use pressure to get Iran to reopen the waterway on its own.

Oil prices fell Tuesday but both major contracts were still sitting above $100 a barrel. Stock markets in Hong Kong, Shanghai, Sydney, Singapore and Jakarta all gained. Tokyo went back and forth. Seoul, Taipei and Manila finished lower.

Trump also warned on Monday that the US would strike Kharg Island. Nearly all of Iran’s crude oil ships out from there. He said American forces could destroy power plants, oil wells and even water facilities. Experts say targeting civilian infrastructure could be a war crime.

Iran has already threatened to hit back. It has warned it could strike energy sites and water plants in nearby Arab countries that host US troops. That has raised fears the conflict could spread further.

Still Trump said his officials were now dealing with a more reasonable side of the Iranian government. Tehran denied that any talks were happening. It accused Trump of lying and said the US was preparing a ground invasion.

Secretary of State Marco Rubio said he was hopeful about working with certain people inside Iran’s government.

Market experts warned that any US ground operation or wider Iranian retaliation could send oil prices to levels not seen since July 2008, when Brent hit almost $150 a barrel.

– ‘De-escalation and re-escalation’ –
In a sign Iran was determined to keep control of Hormuz, state media reported Monday that a parliamentary commission had approved plans to impose tolls on vessels transiting it.

With Trump flipping between hope for talks and threats, analysts said investors were having to walk a tightrope.

“The market continues to be headline-driven as the Trump Administration has delivered a variety of messages surrounding de-escalation and re-escalation of the war in Iran,” Wolfe Research’s Chris Senyek said.

With the war now in its fifth week, governments are moving to shore up their economies.

Economy ministers and central bankers from the G7 club of rich countries met in Paris to discuss the war’s effects, with many countries introducing energy-saving measures or cutting fuel taxes to help consumers.

Dubai said it will provide support worth more than $270 million to help businesses and families, while Norway will temporarily cut diesel and petrol taxes and Bangladesh ordered civil servants to switch off lights and turn down air conditioning to save power.

Sri Lanka announced a nearly 40 percent increase in electricity prices from Wednesday as it battles an energy shortage. Colombo has raised fuel prices three times this month, increasing them by more than a third, and has imposed a four-day working week in a bid to save energy.

“From here, the burden shifts from military outcomes to economic endurance. The question is no longer how high oil spikes, but how long elevated energy costs bleed into growth, margins, and consumption,” said SPI Asset Management’s Stephen Innes.

Federal Reserve boss Jerome Powell also provided a little support, saying Monday the bank could look past energy shocks because they “have tended to come and go pretty quickly” but monetary policy changes take time to flow through the economy.

While the spike in energy prices threatens to send inflation soaring again, he added that officials “feel like our policy is in a good place for us to wait and see how that turns out” and “inflation expectations do appear to be well-anchored beyond the short term”.

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– Key figures at around 0230 GMT –
Brent North Sea Crude: DOWN 1.3 percent at $106.04 a barrel

West Texas Intermediate: DOWN 0.7 percent at $102.22 a barrel

Tokyo – Nikkei 225: DOWN 0.1 percent at 51,820.30 (break)

Hong Kong – Hang Seng Index: UP 0.5 percent at 24,869.71

Shanghai – Composite: UP 0.3 percent at 3,935.05

Euro/dollar: UP at $1.1474 from $1.1460 on Monday

Pound/dollar: UP at $1.3207 from $1.3183

Dollar/yen: UP at 159.71 yen from 159.69 yen

Euro/pound: DOWN at 86.88 pence from 86.93 pence

New York – Dow: UP 0.1 percent at 45,216.14 (close)

London – FTSE 100: UP 1.6 percent at 10,127.96 (close)