Oil slips as markets bet on US pullback from Iran conflict

Oil prices extended losses on Thursday as investors positioned for a potential de-escalation in the West Asia conflict, with markets increasingly betting that the United States may scale back its military campaign against Iran.

Brent crude futures fell more than $1 to hover near the $100 per barrel mark, while US West Texas Intermediate (WTI) crude dropped below $99, adding to declines in the previous session. The pullback comes as traders await a key address by US President Donald Trump that could offer clarity on Washington’s next steps in the conflict.

In remarks ahead of the speech, Trump said the US would end the war with Iran “fairly soon”, fuelling expectations of a possible drawdown and easing of supply risks that had driven oil prices sharply higher through March.

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“The sell-off gathered pace on mounting hopes that the conflict could be winding down,” analysts said, noting that markets are now pricing in a more dovish tone from Washington.

The prospect of reduced hostilities has tempered concerns over disruptions to the Strait of Hormuz, a critical shipping route that carries roughly a fifth of global oil and liquefied natural gas supplies. Any sustained easing of tensions could help restore smoother energy flows, particularly to Asia and Europe.

However, analysts caution that a US pullback alone may not be enough to eliminate risks in the region. The absence of a formal ceasefire agreement could leave shipping lanes vulnerable and keep a geopolitical risk premium embedded in oil prices.

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“A US exit without guarantees on safe passage could still leave energy infrastructure and tanker traffic exposed,” market participants noted, pointing to the fragile security environment across the Gulf.

Those risks were underscored by fresh escalation on the ground. On Wednesday, an oil tanker leased to QatarEnergy was struck by an Iranian cruise missile in Qatari waters, highlighting the growing threat to maritime traffic despite rising hopes of de-escalation.

The evolving supply picture is also raising concerns beyond the immediate region. The International Energy Agency warned that disruptions could begin to weigh on Europe’s economy as early as April. The continent had so far been cushioned by pre-war contracted cargoes, but that buffer is expected to thin in the coming weeks.

March’s surge in crude prices had already reignited inflation concerns globally and added pressure on policymakers grappling with slowing growth. While the recent dip in oil offers some relief, analysts say volatility is likely to persist until there is greater clarity on the trajectory of the conflict and the security of key energy routes.