Oil Dips On Ceasefire Hopes Despite Trump Urging Tehran To Evacuate

Analysts respond to Iran wanting a ceasefire and write off Friday's price spike as "knee jerk" trading: File Image/Pixabay

The interpretation of pundits that Iran is seeking an end to hostilities with Israel caused a dip in oil prices on Monday, even though the elements that triggered the strikes and counter strikes between the two countries remained decidedly unchanged.

Brent settled down $1 to $73.23 per barrel, and West Texas Intermediate settled down $1.21 to $71.77 per barrel.

The sudden optimism about a truce came about when Iran implored U.S. president Donald Trump to demand that Israel immediately cease its strikes in exchange for further negotiations about its nuclear program.

Meanwhile, Iran escalated its strikes on Israel, and Trump reiterated his stance that the Islamic republic can’t have a nuclear weapon – and urged everyone to evacuate Tehran as soon as possible.

Andrew Lipow, president of Lipow Oil Associates, seemed less certain than other analysts that a ceasefire was forthcoming, pointing out that this was the first time oil and gas production facilities were targeted in this latest conflict.

He said, “If we look back at what’s going on in the Middle East today, in spite of the hostilities between Iran and Israel that we’ve seen over the years, this is really the first time we’ve seen oil and gas production facilities, as well as refined product depots, actually being targeted and impacted.

“In fact, Israel had launched missiles against Iran's South Pars natural gas field so, we do know that there’s some impacts in that energy space....what the market is now looking at is, will there going to be impacts on oil production facilities as well as oil export facilities that might lead Iran to cause a potential supply disruption by attacking either tankers in the Strait of Hormuz or actually attempting to shut the strait down.”

Still, news outlets such as Bloomberg held that Monday was a predictable session of pulling back from what it described as “knee jerk” oil trading into overbought territory on Friday, and put faith in Iran’s foreign minister, Abbas Araghchi, who said in a post on X that Washington’s intervention “may pave the way for a return to diplomacy” between Iran and Israel.

Bloomberg added that there were plenty of other concerns in addition to the fighting, “Key among them are president Donald Trump’s tariffs, which still threaten to slow the economy and raise inflation if the U.S. government doesn’t win trade deals with other countries to reduce Trump’s taxes on imports.”

In other oil news on Monday, the latest monthly report from the Organization of the Petroleum Exporting Countries (OPEC), showed that five OPEC members -  Saudi Arabia, Iraq, UAE, Kuwait, and Algeria – raised their combined output in May by 310,000 barrels per day (bpd), far less than the agreed-upon 411,000 bpd hike for last month.

Analysts noted that the lower OPEC output compared to the plans may ease concerns of oversupply, “although the market is now almost exclusively focused on potential supply productions in the Middle East amid an escalating Israel-Iran conflict.”