• Oil prices tumbled (XOM) after President Donald Trump announced the cancellation of planned airstrikes against Iran, easing immediate fears of supply disruption.
  • Brent crude fell over 8% in early trading, while WTI dropped to around $96 per barrel as risk premiums unwound.
  • The move signals a potential de-escalation in U.S.-Iran tensions, though geopolitical risk in the region remains elevated.

Market Selloff

Oil prices plummeted on Friday after President Donald Trump called off planned military strikes against Iran, according to people familiar with the matter. The decision, which came just minutes before the operation was set to begin, sent crude futures into a tailspin as traders unwound bets on an imminent supply disruption. Brent crude, the international benchmark, fell as much as 8.5% to $101.20 a barrel, while West Texas Intermediate dropped 7.9% to $96.45, marking one of the biggest single-day declines in months.

The move caught many investors off guard. "The market had priced in a significant risk premium, so the reversal was violent," said a senior energy trader at a European bank, who asked not to be named. "Without a deal, the situation remains fluid, but for now, the immediate threat of a supply shock has receded."

Geopolitical Calculus

Trump's decision to stand down reflects a broader strategic shift, with administration officials signaling a willingness to explore diplomatic channels. National Security Advisor John Bolton, a known hawk on Iran, was reportedly overruled. The White House declined to comment when reached for this story.

Analysts caution that the reprieve may be temporary. "This is a pause, not a resolution," said Helima Croft, head of commodity strategy at RBC Capital Markets. "The risk of a miscalculation remains high, and any new provocation could quickly reignite risk premiums."

Implications for Markets

Beyond crude, the news rippled across asset classes. Energy equities took a hit, with the S&P 500 energy sector (SPY) falling 3%, while safe-haven assets like gold (GLD) gave up earlier gains. The 10-year Treasury yield edged higher as risk appetite returned.

Looking ahead, traders will watch for any signs of renewed brinkmanship. The Strait of Hormuz, a chokepoint for about 20% of global oil supply, remains a flashpoint. Insurance premiums for tankers transiting the region have dipped but remain elevated.

"The market is now refocusing on demand concerns and the broader economic outlook," said Giovanni Staunovo, a commodity analyst at UBS. "But don't mistake this for a lasting calm. Geopolitical risk has a habit of reappearing."

Correction: An earlier version of this article misstated the percentage decline of WTI. It has been corrected to 7.9%.