Trump Weighs Military Action as Oil Prices Decline

President Donald Trump is weighing a decision on whether to resume major military operations against Iran or end the six-month conflict. While Trump indicated he is in listening mode to hear the positions of six states regarding a diplomatic push, he is also considering resuming attacks prior to a meeting with Gulf state leaders in New York.

Global oil prices, including Azeri Light, Urals, and North Sea Dated Brent, declined on September 18 as hopes for a diplomatic resolution grew. Despite the price dip, the Government of Saudi Arabia continues to manage risks by rerouting exports via the Strait of Hormuz and working to restore the capacity of its East-West oil pipeline following Houthi attacks. Meanwhile, the Government of China has urged Iran to curb Houthi activities at the request of Saudi Arabia.

Financial markets remain volatile as JP Morgan abandoned its baseline oil market forecasts after Brent crude breached $100 per barrel without a conflict resolution. While global inventories have fallen by approximately 555 million barrels, lower global demand and reserves in Asia and Europe have prevented a sharper price surge. Analysts warn that continued disruptions at the Bab al-Mandab strait and Saudi export routes could drive prices higher later this year.