Global Markets Tumble, Oil Prices Surge After Trump's Iran Remarks

Global markets fell, and oil prices surged after United States President Donald Trump lashed out against Iran, saying that the memorandum of understanding signed with Iran to end the conflict was “over” and warning that the US would likely carry out additional strikes on Wednesday night following attacks the previous day.

On Wall Street, all major indices opened lower on the heels of the president’s remarks. The Dow is down 0.8 percent, the tech-heavy Nasdaq is down 0.2 percent, and the S&P 500 is down 0.5 percent.

The international benchmark Brent crude is up 4.2 percent to $77.24 a barrel, the highest in two weeks.

“We’re going to hit them hard tonight,” Trump told reporters at the NATO summit in Turkiye before his meeting with Ukrainian President Volodymyr Zelenskyy, adding that it “may be a big attack”.

Oil prices had been dropping in the last few weeks, down from a $126-a-barrel high in late April, amid a looming deal in mid-June to end the war and allow energy resources to flow through the key Strait of Hormuz, through which roughly a fifth of the world’s oil travels.

On the heels of the agreement in June, Trump promised that petrol prices for US consumers would “drop like a rock”, and prices did begin to decline. After a $4.48 per gallon ($1.18 per litre) high in May, prices have now hit $3.79 per gallon ($1.00 per litre), according to the American Automobile Association (AAA), which tracks daily petrol prices. It is still well above the $2.98 per gallon ($0.78 per litre) on February 28 when the US and Israel first struck Iran, but analysts say cuts on fuel prices are at risk.

“The peace agreement between the US and Iran is the key risk in the second half of this year. It will determine whether the global economy gets an energy-driven disinflation tailwind or absorbs a second oil shock. Recent developments highlight that it’s the key domino that will determine whether other risks are amplified or dampened,” Ryan Sweet, chief global economist at Oxford Economics, said in remarks provided to Al Jazeera.

“Anytime we hit Iran, oil goes up a little bit,” Trump told reporters.

Trump, however, also stressed that the US has heightened production of oil stateside.

“We are producing more oil than Russia and Saudi Arabia combined,” Trump told reporters.

US Treasury Secretary Scott Bessent on Wednesday echoed his remarks, saying that he thinks US oil should potentially trade at a premium to the rest of the world.

At the NATO summit, Trump was asked if the MoU to end that war was over, to which he replied that he thinks so, saying, “I don’t want to deal with them.”

His comments follow the Iranian Revolutionary Guard Corps’ statement that they targeted US military sites in Bahrain and Kuwait in response to a wave of US strikes across Iran following attacks on tankers in the Strait of Hormuz. The US also revoked a licence allowing Iran to sell oil.

“It goes without saying that the tide change in the oil sector risks fully retracing back to the March/April peaks if the latest escalation leads to attacks on Iranian infrastructure and renewed uncertainty regarding stability in the region,” Ian Lyngen, head of US rates strategy at BMO Capital Markets, told the Reuters news agency.

Travel stocks took a hit amid looming higher fuel prices. United Airlines tumbled 3 percent, Southwest Airlines by 2 percent, and Delta Airlines by 2.4 percent.

On the other hand, as oil prices jumped, so did energy stocks. ConocoPhillips ticked up 1.8 percent. Chevron was not far behind, rising 1.5 percent, and ExxonMobil followed with a 1.4 percent jump.

Gold prices tumbled as well. Spot gold dropped 0.8 percent to $4,072.69 per ounce after hitting its lowest level since 2 July earlier in the session. US gold futures for August delivery slipped 1.8 percent to $4,083.20 per ounce.