Trump says oil prices will drop like a rock. It’ll be more like a feather

Trump Predicts Oil Prices Will Plummet Rapidly, But Market Outlook Is More Cautious

The Presidential Promise and Market Skepticism

Trump says oil prices will drop – President Donald Trump has long promised that resolving the Iran conflict would bring immediate relief to energy markets, with oil prices falling sharply once the Strait of Hormuz reopens. However, recent developments suggest that the market may not share his optimism. As the final agreement framework is set to be finalized on Friday, Trump’s rhetoric about “dropping like a rock” has been met with mixed reactions, particularly as the price of Brent crude remains well above the $70 threshold that once defined pre-war stability.

“We’ll figure out what the new normal is,” said Dan Pickering, founder and chief investment officer at Pickering Energy Partners. “But it isn’t going to be $2.85 gasoline.”

While Trump’s forecast hinges on the idea of a swift return to “normal” pricing, the market appears to be thinking longer-term. Despite the recent dip in oil prices, which have fallen below $85 and dropped approximately $25 from their peak a month ago, forward-looking contracts indicate that the decline may be more gradual. Analysts point out that the most immediate price movements—those tied to the current month’s delivery—have already seen significant easing, but the long-term outlook remains uncertain.

Strait of Hormuz: A Geopolitical and Logistical Challenge

The Strait of Hormuz, a critical chokepoint for global oil shipments, has become a focal point of the ongoing conflict. With Iran having laid mines in the waterway, only two narrow passages remain open: one near the Iranian coast and the other along Oman’s shores. This strategic limitation has created a bottleneck, slowing the flow of tankers that were once clogging the strait in anticipation of a resolution.

Experts warn that the reopening of the strait is far from a simple process. While the US Navy has advanced minesweeping technology, the task of clearing the mines requires meticulous work. According to Jakob Larsen, safety & security officer at BIMCO, the process involves ensuring vessels maintain a safe distance to avoid collisions or groundings. “The passage is extremely constrained, and any misstep could lead to major disruptions,” Larsen explained.

Even once the mines are neutralized, the market faces another hurdle: the time it will take to restore full oil traffic. Niklas Rasmussen, a senior analyst at BIMCO, estimates that it could take about two months to stabilize operations. This timeline assumes a lasting peace agreement, which itself is subject to political uncertainty. Iran has already signaled its intent to retaliate against any ships transiting the strait, keeping maritime insurance rates elevated and prompting caution among shippers.

Oil Market Dynamics and the Path to Recovery

While the short-term price drop has been notable, the long-term trajectory of oil prices depends on more complex factors. The agreement between Iran and its counterparts may bring an end to the immediate threat of supply disruptions, but it does not eliminate all risks. The market’s response to the deal has been measured, with futures contracts for the next year showing only slight movements. This suggests that investors are hedging against potential setbacks, rather than embracing Trump’s vision of a quick rebound.

Analysts like Vikas Dwivedi, global oil and gas strategist at Macquarie Group, highlight the delicate balance required to restore normal operations. “The number of vessels ready to take on oil near the strait is still lower than usual,” Dwivedi noted. “It will take time to mobilize the necessary fleet.” With only several dozen ships currently positioned to load crude, the market anticipates a gradual increase in activity once the strait is cleared. This could lead to a more substantial price adjustment in the coming weeks, though the process is unlikely to be rapid.

Trump’s prediction that oil prices would “drop like a rock” has been viewed by some as overly optimistic. The president’s rhetoric often aligns with short-term market reactions, but the reality of the situation is more nuanced. The oil market is now grappling with the interplay of geopolitical stability, logistical constraints, and the evolving needs of global consumers. While the reopening of the strait is a crucial step, it is just one part of a broader equation that includes production levels, demand fluctuations, and the pace of economic recovery in key regions.

From Crisis to Calm: The Road Ahead

As the deal nears finalization, the focus shifts to the next phase: reestablishing regular oil flows. The US has pledged to support the agreement, with its naval assets playing a pivotal role in securing the strait. However, the process of deactivating mines and ensuring safe passage will require patience. Larsen emphasized that the task is not only technical but also strategic, as the continued presence of mines could delay the full resumption of trade.

Once the strait is operational, the market may see a surge in activity. But the timing of this surge remains a question mark. Dwivedi estimates that it could take up to 30 days to position the full complement of ships needed to meet rising demand. “The initial influx will be modest,” he said. “It’s only after the infrastructure is fully restored that prices will stabilize.” This gradual approach contrasts sharply with Trump’s expectation of an immediate, dramatic decline, underscoring the gap between political promises and market realities.

Ultimately, the outcome of the Iran deal will depend on its ability to maintain peace in the region. While Trump’s vision of a quick price drop is appealing, the market’s cautious stance reflects a more grounded assessment of the challenges ahead. The Strait of Hormuz, once a symbol of crisis, is now a test of resilience and coordination. As the world watches the situation unfold, it’s clear that the path to “normal” pricing will require more than just a political resolution—it will demand a careful recalibration of supply, demand, and risk management.

In the meantime, the oil market continues to adapt. The drop in prices has already eased some financial pressures, but the broader implications of the conflict remain. The idea of “normal” is now being redefined, with analysts agreeing that the post-war era will bring a new set of challenges and opportunities. As the agreement is signed and the strait begins to clear, the market’s patience will be tested, and its eventual response will determine whether Trump’s forecast of a “rock”-like decline is accurate—or if it will be more of a slow, steady descent.