Oil prices drop as Trump signals two-week window on Iran action

Oil prices retreated slightly on Friday after US President Donald Trump signalled that a decision on whether to launch a military strike on Iran would be made within two weeks.

The announcement tempered immediate fears of escalation, even as fighting between Israel and Iran continues to intensify.

Brent crude fell toward $77 a barrel, trimming gains from earlier in the week, while West Texas Intermediate (WTI) held steady near $74. The pullback followed a volatile week in the energy markets, driven by heightened geopolitical risks in the Middle East.

As reported by Bloomberg, Trump’s dictated message, conveyed through White House spokesperson Karoline Leavitt, said there remained a “substantial chance of negotiations” with Tehran. Leavitt added that the timeline for a final decision was still open, but the administration expected to act within two weeks.

A volatile week in the oil market

Oil futures experienced significant swings over the past five days. According to Bloomberg, price volatility spiked, timespreads widened sharply, and bullish call options surged briefly surpassing levels seen during Russia’s invasion of Ukraine in 2022.

Brent had closed nearly 3 per cent higher on Thursday, following concerns of a potential US strike over the weekend. However, Trump’s statement late Thursday helped ease some of those fears and brought a temporary pause to the market rally.

Analysts say prices remain elevated due to geopolitical premiums. Goldman Sachs estimates that ongoing conflict in the Middle East is adding about $10 a barrel to crude benchmarks.

Israel–Iran conflict: Infrastructure intact, tensions rising

The broader context for market volatility is the escalating conflict between Israel and Iran.

As per Reuters, Israel has carried out strikes on Iranian nuclear and military facilities in recent days, including targets near Natanz, Arak, and air defence sites around Tehran. In response, Iran launched missile and drone attacks on Israeli cities, including an airstrike that hit Soroka Medical Center in Beersheba, injuring dozens of civilians.

While the attacks have caused extensive damage to infrastructure and led to civilian casualties on both sides, Iran’s oil production and export infrastructure have so far remained unaffected. Satellite images reviewed by Bloomberg suggest that crude storage tanks at Kharg Island, Iran’s main export terminal, are full, indicating the country is moving oil out rapidly amid fears of wider sanctions or conflict.

The biggest strategic concern remains the Strait of Hormuz, a narrow waterway through which about 20 per cent of global oil supply flows. So far, there are no signs of disruption, but markets continue to monitor the region closely.

What next?

According to Reuters, senior US officials have been preparing for potential military action, but internal discussions point to a cautious approach, balancing strategic objectives with the risk of further regional instability. Trump’s two-week timeline appears to be aimed at allowing room for diplomatic outreach while keeping pressure on Tehran.

Market analysts expect oil prices to remain in the $70–$80 range in the near term, with risk premiums rising if the conflict escalates further or if US involvement becomes imminent.

(With inputs from the agencies)