BRENTOIL Gives Back the War Premium After Trump Signals Iran Conflict Nearing End

The Spike and the Reversal

Brent crude had been on a one-way tear since US-Israeli strikes on Iran began on February 28, rising roughly 50% from pre-conflict levels to touch $119.48 on Sunday — the highest price since June 2022. Iran's retaliation included an effective blockade of the Strait of Hormuz, a chokepoint responsible for 20% of the world's oil and 25% of its LNG. Iraqi, Emirati, and Kuwaiti production fell as barrels backed up with nowhere to go.

Then it all reversed. Brent gave back more than 25% from peak to trough on Monday as two catalysts hit in sequence: Trump told reporters at Doral that the war would end "very soon," claiming the US had "wiped every single force in Iran out." Hours later, the Financial Times reported that G7 finance ministers would discuss a coordinated SPR release, and the IEA convened an extraordinary session of member governments. The combination crushed the war premium.

SPR Threat Caps the Upside

The scale of the proposed reserve release is significant. Three G7 countries, including the US, have expressed support for tapping stockpiles, with some US officials floating a release of 300 to 400 million barrels — roughly a quarter to a third of the IEA system's public reserves. That alone would cover several months of Iranian export disruption.

G7 finance ministers held a call on Monday but did not formally agree to release reserves, opting to wait for more analysis. The decision was deferred, not rejected. For the market, the signal matters more than the barrels — the G7 has effectively put a ceiling on how far oil can run, at least until the Strait reopens or the conflict escalates further.

OPEC+ added to the bearish pressure. On March 1, eight member states agreed to increase production by 206,000 barrels per day starting in April, resuming the unwinding of voluntary cuts even as the conflict raged.

Why the Market Doesn't Believe the War Premium

The speed of the reversal tells you something about positioning. Much of the move above $100 was panic-driven — physical traders scrambling for non-Gulf barrels, specs piling into calls, and algos chasing momentum on Hormuz headlines. The underlying supply disruption is real, but the market is now pricing in a shorter conflict timeline based on Trump's rhetoric.

That said, Trump's statements were characteristically contradictory. He predicted a quick end while simultaneously vowing to press forward until Iran's leadership was "decisively defeated." Defense Secretary Hegseth said the war was "just beginning." Iran has rejected ceasefire talks outright. The disconnect between Trump's optimism and the operational reality on the ground means this selloff could itself be a trap — if the Strait stays closed and the SPR release stalls, the bid comes back fast.

At $89, Brent is essentially back to where it would trade on pre-war fundamentals plus a modest risk premium. The market is betting the disruption is temporary. If it isn't, this dip gets bought hard.

What to Watch

Three things determine where this goes next.

First, the Strait of Hormuz. Iran's blockade is the single most important variable. If shipping resumes — either through a ceasefire, naval escort corridors, or Iranian capitulation — oil has room to fall further toward $75-80 pre-conflict levels. If the blockade holds through April, the 206k b/d OPEC+ increase is meaningless against the loss of Gulf transit.

Second, the G7 SPR decision. Energy ministers are meeting Tuesday for a formal session. A concrete commitment to release reserves — especially at the 300-400M barrel scale being discussed — would cap any rally. A non-decision keeps the upside open.

Third, Trump's next move on Iran. His comments have been driving intraday swings of 10-15%. Any shift toward actual ceasefire negotiations or, conversely, escalation toward regime change operations, will set the next directional move. The perp is pricing in resolution. The war isn't there yet.

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