New York: Global oil prices plunged Wednesday, totally reversing an earlier brief spike that followed Iranian missile attacks on US targets in Iraq amid hopes the conflict will not escalate further.
Comments by Iranian officials and US President Donald Trump eased tensions substantially and pushed crude prices lower and lower in late European trading.
The strikes, launched in retaliation for the assassination of Iran’s top general last Friday, sent Brent and WTI prices to multi-month peaks before profit-taking prevailed.
Iran said it had “concluded” its missile attacks for now, and observers remarked that they had seemed carefully calibrated to avoid US casualties.
Trump told a news conference: “Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world.”
Iranian Foreign Minister Mohammad Javad Zarif had tweeted earlier that the country does “not seek escalation or war.”
A Eurasia Group note predicted that Tehran and US President Donald Trump will de-escalate the crisis, saying the Iran attack “appeared designed for maximum domestic effect with minimum escalatory risk.”
Analysts pointed out that oil traders had many sources at their disposal in any event.
SEB analyst Bjarne Schieldrop added that “not a single drop of oil supply has been lost due to the recent incidents and this is why the oil price has fallen back down again so quickly.”
Analysts also said the drop in prices was due in part to a weekly US oil supply report that showed higher inventories.
Global stock markets initially slid on investor concern over the US-Iran clash, but European bourses mostly finished higher as anxiety over the situation ebbed.
Wall Street stocks rallied after Trump’s late morning statement. All three major indices ended solidly higher, with the Nasdaq at a record.
“At least for now, the retaliation is behind us,” said Art Hogan, chief market strategist at National Securities. “The market can move on.”
Hogan said investors are focused on an expected signing of a US-China trade accord next week and an upcoming quarterly earnings season.
Among individual shares, Boeing dropped 1.8 per cent, weighing on the Dow, following the fatal crash of a Ukraine International Airlines plane in Iran.
The aircraft involved in the accident was 737-800, a predecessor to the Boeing 737 Max, which has been grounded following two earlier crashes.
Analysts said it was too soon to speculate on causes of the crash but characterized the incident as another unwelcome challenge for the company.