Trump Pauses Iran Strikes: Stocks Surge, Oil Prices Plunge
Global stock markets surged and crude oil prices plummeted Monday after President Donald Trump announced the United States would postpone further military strikes against Iranian energy infrastructure, pending the outcome of negotiations. The Dow Jones Industrial Average closed up 1,070 points, a 2.35% increase, while the S&P 500 rose 2.1% and the Nasdaq Composite gained 2.4%.
The price of Brent crude oil fell 13.2% to $97.40 per barrel, and U.S. Crude dropped 12.5% to $86 per barrel, according to market reports. Trump stated via social media that talks would seize place throughout the week, though the security of the Strait of Hormuz – a vital shipping lane through which approximately 20% of the world’s oil supply passes, and which Iran has effectively closed – remains uncertain.
Initial gains in futures markets and the decline in oil prices occurred immediately following Trump’s announcement. However, market enthusiasm moderated somewhat after the Israel Defense Forces reported continued attacks on Tehran, and amid uncertainty regarding whether Iran would corroborate Trump’s account of events.
“The market woke up Monday to potentially positive news coming out of the Middle East,” said Chris Larkin, managing director of trading and investment at E-Trade from Morgan Stanley, in a note to clients. “However, for any relief rally to continue, tangible action on the geopolitical front will likely be required. We remain in a news-driven market, and given the light economic news calendar this week, focus will remain on oil prices and politics.” European markets also rebounded, reversing earlier losses, with the Stoxx 600 index rising 1.4% and Germany’s DAX index jumping significantly.
U.S. Diesel and gasoline futures also declined Monday, mirroring the drop in crude oil prices. Diesel futures fell 12%, and gasoline futures dropped 11%. Despite these declines, futures remain up 76% and 70% respectively for the year to date.
Despite Monday’s price decreases, crude oil prices remain roughly one-third higher than levels seen before the U.S. And Israel initiated attacks on Iran on February 28th. The surge in global oil prices since the start of conflict has been attributed to a scarcity of tankers willing to navigate the Strait of Hormuz. Trump had previously threatened to “annihilate” Iranian power plants unless Iran halted attacks on maritime transport and reopened the strait.
American consumers have already felt the impact of the conflict in the form of higher fuel prices. The national average gasoline price rose for the twenty-third consecutive day on Monday, reaching $3.96 per gallon, the highest price since August 2022, according to AAA. The average price has increased $1.02 – or 34% – in the last month, a monthly increase exceeding those following Hurricane Katrina in 2005 and the Russian invasion of Ukraine in 2022. The latter surge ultimately drove prices to a record high of $5.02 per gallon.
While the United States, the world’s largest oil producer, obtains a relatively small amount of crude oil from the Middle East, global commodity markets set prices. Gasoline prices in the U.S. Are directly affected, as gasoline is derived from crude oil. Even if the conflict subsides and oil prices begin to fall, it may take time for those decreases to be reflected at the pump, as previous increases work their way through the distribution system.