De-escalation or market manipulation? How Trump's Iran pause impacted oil prices

With the US and Iran clearly not on the same page, the intention behind Trump's announcement remains unclear.

As the conflict between the US and Iran continues to keep oil prices and energy supply at brink, an announcement from US President Donald Trump took us by surprise on Monday. The Republican leader, who announced this war to end the "terror regime" in Iran, said that he held "productive talks" with Tehran to end hostilities.

The US president went on to say he has ordered a pause on strikes on Iranian energy sites and power plants for the next five days, effectively backing down from his threat to launch attacks on Iran's energy infrastructure. (REUTERS)

The US president went on to say he has ordered a pause on strikes on Iranian energy sites and power plants for the next five days, effectively backing down from his threat to launch attacks on Iran's energy infrastructure.

Shortly after Trump's announcement, oil prices plunged by 13 per cent, reported Bloomberg. The price of Brent crude sank to $96 per barrel, and European and American shares rose.

Just as the world saw a glimmer of de-escalation and a possible end to the war, Iran stepped in and denied Trump's claim, stating no talks had been held.

Citing the foreign ministry, Iranian state media said that Trump "backed down" after warnings from Iran over naval mines in the Strait of Hormuz.

Iran's parliament speaker took it a step further and said that no talks or discussions were held between Tehran and the US and Trump's announcement was a mere tactic to "manipulate the markets."

"No negotiations have been held with the US, and fake news is used to manipulate the financial and oil markets and escape the quagmire in which the US and Israel are trapped," Mohammad-Bagher Ghalibaf wrote on X.

With the US and Iran clearly not on the same page (and Israel a completely different story), the intention behind Trump's announcement remains unclear.

De-escalation or market tactic?

The White House has remained tight lipped over Trump's statement of pausing strikes after two days of discussions with Iran. As Iran continues to deny the talks, Trump has claimed he spoke to a "top respected leader, who is not the Ayatollah."

Tehran also stood firm on the fact that the US feels trapped in this conflict and is now looking for a way out due to the impact the war has had on global economy.

Trump's announcement on pausing strikes also come just before US markets opened on Monday. Bloomberg reported that the US president's announcement was also aimed at investors rattled by fallout due to the war.

After US markets opened after his post, the S&P 500 jumped 2.2%, its biggest rally since May.

Two-year Treasury yields at one point tumbled 0.22 percentage points from their highs to a low of 3.79%, while Brent crude dropped below $100 a barrel.

The dollar also fell and European stock and bond markets rebounded sharply from losses to end the day higher.

Meanwhile, WTI crude futures also tanked to 14.25 per cent to reach an intraday low of $84.23 per barrel.