Oil Prices Plunge as Trump Cancels Iran Attack Plans

Global oil prices experienced a sharp decline in Asian trading, with crude oil falling by more than $5 per barrel. Brent crude dropped 5.83 percent to $82.80 per barrel, while U.S. benchmark West Texas Intermediate (WTI) fell 6.57 percent to $79.11 per barrel. This significant price drop followed U.S. President Donald Trump's decision to cancel planned strikes against Iran.

The market's reaction reflects a reduction in geopolitical risk premiums, which had previously driven up oil prices due to concerns over potential supply disruptions in the West Asia region. Professor Emeritus Dr. Barjoyai Bardai, an economist at Universiti Sains dan Teknologi Malaysia (MUST), explained that the market had factored in a risk premium because of fears that conflict could disrupt major export routes, including the Strait of Hormuz. "As the risk subsides, the premium begins to disappear, and prices adjust accordingly," he told Utusan Malaysia.

Looking ahead, Barjoyai believes the price decrease could persist in the medium term, provided no new conflicts emerge to disrupt global oil supplies. The future direction of oil prices will depend on several factors, including geopolitical stability in West Asia, particularly involving Iran, Israel, and Gulf nations. Decisions by OPEC+ on production policies, the economic performance of the U.S., China, and Europe, the U.S. Federal Reserve's interest rate policies, and the strength of the U.S. dollar will also be key determinants. Barjoyai forecasts Brent crude to trade between $68 and $78 per barrel by year-end under a baseline scenario, with potential increases to $78-$88 if the global economy strengthens. However, he noted that serious supply disruptions due to geopolitical conflict could push Brent prices above $90, even nearing $100, though this remains a less likely scenario for now.