One analyst says trading this week has been grossly driven by overreaction: File Image/Pixabay

U.S. president Donald Trump’s approval ratings may have plummeted, but his word apparently still holds considerable sway with oil traders, who on Tuesday embraced his remark that the war with Iran would soon end – and caused crude prices to shed a massive 15 percent.

As of 1801 GMT, Brent fell $14.23, or 14.5 percent, to $84.73 per barrel, and West Texas Intermediate dropped $14.46, or 15.5 percent, to $80.31.

Spirits were also buoyed by the U.S. Navy successfully escorting an oil tanker through the Strait of Hormuz, and Trump warning Iran against laying mines in the strait – and then presiding over the destruction of 16 Iranian minelaying vessels in the region.

Andrew Lipow, founder of Lipow Oil Associates, said of Tuesday’s trading, “This is the market reacting to the possibility that the Strait of Hormuz could reopen…from the administration’s perspective, the move also carries clear optics: lower oil and gasoline prices help ease consumer pain.”

But Suvro Sarkar, energy sector team lead at DBS Bank, was critical of trading behaviour: “Clearly Trump’s comments about a short-lived war have calmed markets; while there was an overreaction to the upside yesterday, we think there is an overreaction to the downside today.”

Also critical was Hakan Kaya, a senior portfolio manager at Neuberger Berman, with regards to the flurry of analytical predictions about where oil prices were headed in the near future.

Kaya said, "Either the Strait of Hormuz reopens and you see a massive unwind of the risk premium, or it stays shut and we are looking at the largest supply disruption in modern history; there is no middle ground, and that is why putting a number on it is almost irresponsible."

In order to avoid the scenario of a historic supply blockage, the International Energy Agency on Tuesday hosted G7 energy ministers to decide whether to release emergency oil reserves, estimated to collectively be in excess of 1.2 billion barrels of emergency stocks, in addition to 600 million barrels of industry inventories.