Oil prices fall as Trump says further U.S. strikes on Iran aren't needed for now

U.S. regular gasoline average falls to $3.97 a gallon

Oil prices fell Tuesday after President Trump signaled that further U.S. military strikes on Iran were not necessary for now. Brent crude, the global benchmark, declined 2.1% to $90.61 a barrel, while West Texas Intermediate futures fell 1.9% to $85.18 a barrel, according to The Wall Street Journal. The national average for regular gasoline in the United States also fell below $4 a gallon, to $3.97.

Oil prices extended their losses Tuesday, with Brent briefly trading below $90 a barrel before rebounding. The move followed Monday’s selloff, when Brent dropped nearly 6% as traders reassessed the prospect of renewed U.S. military action against Iran.

Oil prices have fallen since last week’s U.S. midterm elections, which increased expectations of a diplomatic resolution to the conflict. On Monday, Trump said he saw little need for further military strikes as negotiations continued.

Trump’s comments followed talks with Qatar’s prime minister, who has been mediating between Washington and Tehran. UOB’s global economics and markets research team said the diplomatic signals had prompted a sharp reassessment of the geopolitical risk premium in oil prices.

Signs of easing supply tightness also emerged as Middle Eastern oil production recovered. MUFG said Monday that the spread between the nearest Brent futures contracts had narrowed to around $2.60 a barrel from nearly $4 at the end of last week. Physical crude prices were trading below futures.

The crude decline was beginning to feed through to U.S. consumers. The American Automobile Association said the national average price of regular gasoline fell below $4 a gallon Tuesday to $3.97, extending a decline from around $4.17 a week earlier.

Still, a diplomatic breakthrough remained uncertain. Washington and Tehran had not reached an agreement to end the conflict or restore normal shipping through the Strait of Hormuz.

Trump also indicated that the U.S. military remained prepared to act if circumstances changed. The oil and gasoline declines followed reduced expectations of immediate U.S. military action and signs of easing supply tightness, but they did not resolve the conflict or restore normal shipping through the Strait of Hormuz.