Oil Tumbles as Tehran and Jerusalem Halt Strikes, but Fragile Truce Keeps Markets on Edge

Crude oil markets abruptly reversed course on Tuesday, erasing most of the previous session’s sharp gains after Iran and Israel declared a halt to direct military exchanges. Brent futures slid towards $91 a barrel and West Texas Intermediate dropped below $89, a retreat of more than 2% that tracked the ebb of immediate supply fears. The catalyst was a twin announcement from Tehran and Jerusalem, each signalling a suspension of strikes, coupled with an emphatic intervention by President Donald Trump, who declared the adversaries were “very close to achieving a deal”.\n\nViewed from Washington, the pause was cast as a diplomatic opening; Trump’s call for restraint appeared to have bought time. But the calm was relative. Across the Middle East, both governments warned that hostilities could reignite, and Israel indicated it would continue operations against Lebanese territory. “There is some relief regarding the latest halt to direct strikes, but investors are far from convinced this is the end,” said one senior market analyst, capturing a mood of wary scepticism. The fragility was underscored by persistent anxiety over the Strait of Hormuz chokepoint and the risk that even a limited escalation could disrupt energy transport routes.\n\nBehind the price slide, analysts in London pointed to structural pressures that had been masked by the geopolitical premium. Reports of weaker-than-expected global demand, noted by traders in emerging economies, added a bearish undercurrent just as monetary policy repricing gained pace. The lingering conflict continued to feed inflationary expectations, forcing central banks in large developing economies to contemplate rate hikes even as growth faltered—a dynamic that further clouded the demand outlook.\n\nThe market has navigated similar truces before, only to see them collapse, a pattern that leaves traders reluctant to fully discount the risk. For now, the pullback offers a brief respite to import-dependent nations and industrial consumers. But the underlying reality remains unchanged: a durable cessation of hostilities is not yet in sight, and any fresh exchange of fire would swiftly reprice the barrel higher. The coming days will test whether the diplomatic track can outpace the region’s deep-seated cycle of retaliation.