For the past month, the global oil market has been inextricably tethered to Donald Trump's rhetoric regarding the US and Israel's ongoing strikes on Iran. But lately, Wall Street and commodity traders are beginning to tune out the noise.
Before the military campaign commenced on February 28, crude was trading at a relatively stable $72 per barrel. Following the escalation, prices skyrocketed to a peak of $119.50 by March 9, eventually hovering just above $113 recently. During this volatile stretch, the US president's public statements and social media posts have functioned as a high-stakes pendulum for energy prices.
According to Jonathan Raymond, an investment manager at Quilter Cheviot, oil has effectively become a barometer for global instability. Prices have predictably surged when Trump adopts an aggressive posture and softened when he hints at peace.
"Investors are trying to price genuine uncertainty," Raymond explained. "Markets can look skittish or confused, but what they're really doing is managing event risk in real time, with oil sitting right at the centre of that."
However, financial analysts are starting to question the authenticity of these presidential dispatches. Brian Szytel of the Bahnsen Group suggests that some of Trump's diplomatic updates might be strategic maneuvers designed strictly to manipulate crude prices, rather than genuine reflections of foreign policy.
This growing doubt was glaringly apparent last Thursday. Shortly after US equities suffered their sharpest drop since the Iran conflict began, Trump announced that negotiations with Tehran were progressing "very well." He subsequently paused military strikes on Iranian energy facilities until at least April 6. Yet, instead of cooling off, oil prices continued their upward march.
Jane Foley, head of FX strategy at Rabobank, pointed out that the blatant disconnect between Trump's optimistic claims and the total silence from Tehran has left traders incredibly wary. Because there is no visible end to the hostilities, she notes, market anxiety remains high and reactions to the president's assurances are becoming increasingly muted.
Russ Mould, investment director at AJ Bell, added that traders are well aware of Trump's historical tendency to pivot whenever economic or political headwinds pick up. As a result, Mould observes, "there is a degree of scepticism, or even downright cynicism, creeping in at the edges."