Key facts
- Oil prices have fallen back to pre-war levels.
- Brent crude is down 42% from its peak of $126 a barrel.
- WTI crude is down 37% from its peak of $109 a barrel.
- Optimism for a peace deal between the US and Iran is driving the price decline.
- The Strait of Hormuz, which handles 20% of global oil supply, was closed by Iran.
- Israel bombed Iranian energy infrastructure, including storage facilities and a transfer center.
Oil prices have largely reversed their significant wartime surge, returning to pre-conflict levels as optimism grows for an eventual peace deal between the US and Iran, despite the conflict technically continuing. Brent crude, the international benchmark, has fallen 42% from its peak of $126 a barrel earlier this year, while West Texas Intermediate crude has dropped 37% from its wartime high of around $109 a barrel. The market's perception of supply shocks from the Iran war has diminished over time, largely attributed to President Donald Trump's repeated suggestions that the conflict would conclude soon. This sentiment, reminiscent of the 'TACO' trade (Trump Always Chickens Out), where markets anticipate Trump stepping back to boost stock prices, has influenced oil prices. Analysts note that oil markets historically tend to expect a return to normalcy, with price spikes generally proving short-lived since the 1970s oil shock. The conflict began on February 28 with US and Israeli strikes against Iran, leading to an immediate anticipation of Middle East supply disruptions. On March 1, Iran responded by closing the Strait of Hormuz, a critical chokepoint for approximately 20% of the world's oil supply. By March 7, Brent crude had climbed to around $76 a barrel, a 5% increase from its pre-war level. The situation escalated on March 8 when Israel bombed four oil storage facilities and a transfer center in Iran, pushing Brent crude past the $100-a-barrel mark for the first time since the start of the Russia-Ukraine war in 2022. The International Energy Agency declared this the largest oil supply disruption in history. By April 15, damage to energy infrastructure was estimated to be between $34 billion and $58 billion. On March 9, oil prices neared $120 a barrel, a level not seen since the financial crisis, but President Trump's comments suggesting an imminent end to the war caused prices to subsequently fall.