Remarks by President Donald Trump about a U.S. “armada” on its way to Iran reversed a Thursday drop in oil benchmarks, setting them for a weekly gain.
At the time of writing, Brent crude was trading at $64.50 per barrel, with West Texas Intermediate at $59.78 per barrel, after shedding 2% on Thursday following the latest developments in the U.S.-Europe rift over Greenland and President Trump’s declaration that he would not impose tariffs on European countries after all.
As for the “armada”, Reuters quoted a U.S. official as saying that a number of warships, including an aircraft carrier and several guided missile destroyers, were en route to the Middle East, set to arrive in a few days. The news sparked worry that the threats against Iran may have substance, potentially threatening supply from one of the biggest OPEC oil producers.
Earlier this month, Trump announced 25% tariffs on any country doing business with Iran in a bid to pressure the government in Tehran amid large-scale protests in the country. “Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America,” Trump said on Truth Social last week, prompting questions about the security of oil supply from Iran.
Then, later in the week, Trump downplayed the possibility of a direct military U.S. involvement in Iran, saying that violence against the protesters was subsiding. Oil prices immediately plunged, demonstrating yet again the whipsaw effect geopolitical news tend to have on the oil market, regardless of glut reports and forecasts.
In case of disruption in Iranian oil exports, China stands to lose the most, since it is the largest buyer of the commodity. That disruption would—if it came to pass—come on top of higher prices for Venezuelan crude now that the U.S. manages the exports of the South American nation.
By Irina Slav for Oilprice.com
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