Oil prices turn lower as Bessent says U.S. may have Iran deal "today or tomorrow"

But traders have heard the word “progress” often enough to know that, in this conflict, it can have a shorter shelf life than a carton of milk left out in the Bangkok sun.

Takeaways

  • Trump cancelled planned strikes after claiming the broad parameters of an agreement with Iran had been established.

  • The immediate threat of escalation has eased, but Iran has yet to confirm that a workable diplomatic understanding exists.

  • The Strait of Hormuz remains effectively closed, meaning the central risk to global energy markets has not disappeared.

  • Markets are being forced to trade increasingly compressed cycles of military escalation, diplomatic relief and renewed confrontation.

Trump Calls Off Planned Attack

This is getting incredibly tiring. How many times will we fall for the big stick only to dangle the peace carrot of diplomacy?

On Friday, President Trump was warning that Iran would be hit very hard. By Saturday night, the attack had been called off because, according to the president, the broad parameters of a deal had been agreed.

For markets, governments and anyone attempting to follow the strategic direction of this conflict, the problem is no longer simply the level of geopolitical risk. It is trying to work out which side of the bed Trump will wake up on each morning.

The region spent much of Saturday preparing for another major escalation. American diplomatic missions advised citizens to consider leaving parts of the Middle East, airlines extended cancellations across the Gulf, and governments prepared for the possibility that regional airspace could be closed.

Iran, meanwhile, launched drones towards Kuwait, continued to threaten countries assisting the United States and kept the Strait of Hormuz effectively shut to commercial traffic.

Trump said Iran and other regional governments had asked Washington to halt the planned strikes. He agreed to cancel the operation, subject to the two sides being able to move rapidly towards an agreement that would reopen Hormuz and remove Iran’s nuclear threat.

Trump signals deal to end Iran war may be imminent, agrees to “cancel the attack” CBS

“We have just been asked by Iran, and other Middle Eastern Countries, to hold off any attack in that the perimeters [sic] of a deal has been agreed to,” Mr. Trump said in a Truth Social post. “This would include the Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran’s nuclear threat.”

He added: “I have agreed, for the future benefit of the WORLD and, likewise, the survival of a successful and prosperous Iran, to cancel the attack, subject to being able to rapidly make a DEAL. The Country of Israel joins me in this commitment.”

That sounds encouraging. It is certainly better than another weekend of missiles, bombers and retaliatory strikes.

The announcement remains a declaration of intent rather than a completed settlement.

Iran has not publicly confirmed the president’s version of events, commercial shipping has not returned to normal, and the military machinery assembled across the region has not suddenly vanished. The attack may have been cancelled, but the underlying confrontation remains fully armed.

The central market question is whether this represents the beginning of genuine de-escalation or merely another pause while everyone reloads, checks the headlines and waits for the next social-media post.

We have already watched this pattern unfold several times. Military threats push oil higher, shipping is disrupted, airlines reroute and governments prepare for the worst. A diplomatic channel then opens, the immediate fear premium recedes and markets begin pricing a return to normality.

Before that relief can settle, another drone strike, missile launch or political ultimatum starts the cycle again.

The escalation clock is now running faster than the diplomatic clock, and neither one appears to come with an off switch.

That makes the Strait of Hormuz the only signal that really counts.

The cancellation of an airstrike may remove some immediate near-term tail risk, but as long as Iran continues to restrict one of the world’s most important energy corridors, the physical pressure on oil and LNG markets remains in place. Ships have been damaged near the strait, commercial traffic has collapsed, and insurers, crews and operators are still being asked to navigate what has effectively become a war zone.

Until tankers begin moving safely through Hormuz again, claims of diplomatic progress should be treated cautiously. A friendly headline does not move a barrel of oil through a closed shipping lane.

The conflict has also spread well beyond Iran and the United States. Kuwait has faced attempted drone strikes. Saudi energy infrastructure has been attacked. Iraqi militias, the Houthis and other Iranian-aligned groups have widened the battlefield across the Gulf and Red Sea. LNG facilities and commercial shipping are now part of the pressure campaign.

Even if Washington and Tehran agree to step back, the regional machinery of escalation may be much harder to switch off.

Orders have already been given. Militias have already been activated. Defensive systems are already operating on hair-trigger settings.

One poorly directed drone landing in a densely populated urban centre could be enough to ignite the Middle East tinderbox.

This is no longer a clean two-player chess match. It is a crowded poker table where half the players are armed, several are bluffing and nobody appears entirely certain who is holding the cards.

That is why this weekend’s announcement deserves relief, but not celebration.

Trump has created another opening for diplomacy, and markets will understandably react to the reduced probability of an immediate, full-blown American bombardment and even of boots on the ground. Oil may surrender part of its military risk premium at the open, and regional assets could enjoy a temporary reprieve, as will global markets.

But traders should resist confusing the cancellation of one attack with the resolution of the war.

The conflict is being managed hour by hour, threat by threat and headline by headline. Neither side appears to trust the other, while the Gulf states caught between them are increasingly being pulled directly into the fight.

The result is a geopolitical market that now resembles an exhausted boxer repeatedly saved by the bell, only to be shoved back into the ring before reaching the corner stool.

For the moment, diplomacy has won another round.

Whether it lasts until breakfast is one question. Whether it lasts long enough to reopen Hormuz is the only one that matters.

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