Global energy markets, which have been incredibly volatile since the US and Israel launched strikes on Iran three weeks ago, turned sharply lower on Monday after President Donald Trump said in a post on social media that he has postponed further attacks on the country.
In the immediate wake of the president’s announcement, oil dropped by 10% to $100 a barrel, while European gas futures were down as much as 12% to €54/MW.
Beyond the post from Trump, there are no details immediately available as to what has been discussed, or even who the US is talking to.
Much of Iran’s pre-conflict leadership has been killed in the fighting.
There also has yet to be any comment from Israel, which has been heavily involved in the attacks on Iran.
Hostilities
The rapid decline in energy prices following Trump’s announcement does not take those prices back to anywhere close to where they were before the outbreak of hostilities.
Even after the Monday moves, oil remains more than 25% above pre-conflict levels, while gas is 80% higher than February prices.
Even if the conflict was to end this week, the damage to infrastructure which has already happened will likely mean higher energy prices for an extended period.
Repairs are expected to take months and it may be years before liquid natural gas export capacity from Qatar is fully restored.
If Monday morning’s announcement does point to the ending of hostilities, it will at least put a cap on how much more energy prices will rise, which will in turn put a limit on how much further diesel and fertiliser costs will increase for farmers.
SHARING OPTIONS