Trump says oil prices will drop like a rock. It’ll be more like a feather
Trump’s Oil Price Forecast Faces Market Realities
Trump says oil prices will drop – President Donald Trump has long positioned himself as a champion of energy independence, promising that geopolitical tensions would resolve swiftly and that oil prices would plummet to pre-war levels. However, as the Iran deal framework approaches finalization, the market is offering a contrasting perspective: the decline in energy costs may be more gradual than the administration envisions. The key to this debate lies in the Strait of Hormuz, a critical chokepoint where oil flows through a narrow passage, and the complex logistics of restoring normalcy to the region.
A New Era of Oil Prices?
Trump’s strategy has centered on the idea that resolving the Iran conflict would unlock a flood of oil supplies, bringing prices down dramatically. With an agreement set to be signed on Friday, the administration hopes to signal the end of hostilities and a return to stability in global markets. Yet, the market’s reaction suggests that the path to lower prices is more intricate than a simple “drop like a rock.” Recent weeks have seen oil prices fall below $85, a sharp decline from their recent peak, but the long-term trajectory remains uncertain.
“Normal” — i.e., the sub-$70 Brent crude price from before the war — is just around $15 away,” remarked Dan Pickering, founder and chief investment officer at Pickering Energy Partners. “But that’s not the same as a sudden crash.”
Despite Trump’s repeated assurances that prices would “drop like a rock” once the strait reopens, the market appears less convinced. While front-month oil prices have dipped significantly, futures contracts extending into 2031 show a slower descent. This discrepancy highlights the challenges of predicting energy markets, which are influenced by both short-term events and long-term structural shifts.
The Strait of Hormuz: A Strategic Bottleneck
The Strait of Hormuz, a 30-mile-wide waterway between the Persian Gulf and the Arabian Sea, has become the focal point of global oil trade. With Iran mining the strait, only two narrow channels remain open, each requiring precise navigation to avoid collisions or groundings. This bottleneck has already disrupted shipping, and the process of clearing mines could take weeks, according to maritime experts.
Analysts note that the physical constraints of the strait, combined with geopolitical risks, create a unique challenge. “The oil market is about to hit a tipping point,” said Niels Rasmussen, chief shipping market analyst at BIMCO. “The assumption that prices will drop instantly ignores the practical hurdles in restoring full flow.”
Time, Technology, and Trade
While the US Navy possesses advanced minesweeping technology, the process of deactivating mines is painstaking. Each mine must be identified, assessed, and neutralized, requiring careful coordination and time. “It could take several weeks to clear the strait of mines,” Larsen explained. “Even with the best tools, the work is slow and methodical.”
Once the strait is clear, the next phase involves reactivating shipping traffic. However, the pace of this recovery depends on the availability of vessels. Currently, only a few dozen ships are positioned near the strait, ready to transport oil. This number is lower than the typical 100-or-so ships that usually wait for loading opportunities. “The market needs to see more ships in place before prices stabilize,” said Vikas Dwivedi, global oil and gas strategist at Macquarie Group.
Peace or Chaos?
Trump’s optimism hinges on the assumption that a peace deal will hold. But tensions in the region remain volatile, and Iran has already signaled its willingness to escalate. “The agreement is a good start,” noted Kieran Tompkins, senior commodities economist at Macquarie Group. “But it’s not a guarantee of calm. Iran’s threats could delay the strait’s full reopening.”
The insurance market has already reflected this uncertainty, with rates soaring as ships avoid the strait. This has made some financiers hesitant to invest in transit operations. “Without a credible ceasefire, shipowners won’t risk large fleets,” said Larsen. “Even the most confident operators are cautious about navigating these waters.”
What’s the New Normal?
As the strait’s conditions improve, the question remains: what does “normal” mean for oil prices? Pickering emphasized that the term is subjective. “We’ll figure out what the new normal is,” he said. “But it isn’t going to be $2.85 gasoline.” The market is adjusting to a new reality where supply chain disruptions and regional instability play a greater role than ever before.
While the immediate effects of the agreement are visible, the long-term impact may be more subtle. The fall in oil prices has been influenced by a combination of factors, including increased production from US shale and reduced demand due to economic slowdowns. However, the reopening of the strait is expected to trigger a gradual decline, rather than a steep one. “This is a slow-motion event,” said Rasmussen. “The market is already accounting for the expected recovery.”
Time to Rebalance
Even if the strait is fully operational by Friday, the process of restoring normalcy will take time. Empty vessels will need to return to the region to begin loading oil, and this process could stretch into the coming weeks. “It might take up to 30 days to get the necessary ships back in place,” Dwivedi added. “That’s a significant delay for a market that’s already feeling the strain.”
Analysts caution that the time frame for a complete market reset depends on multiple variables. The number of ships available, the efficiency of mine clearance, and the stability of the peace deal all play a role. “We’re talking about a two-month window for full recovery,” Rasmussen said. “That’s optimistic, but it’s the best estimate we have.”
The contrast between Trump’s bold claims and the market’s measured response underscores the complexity of energy economics. While the administration promises rapid relief, the reality is a blend of immediate and long-term factors. The price of oil may fall, but the speed of that descent is shaped by forces beyond just geopolitical resolution.
For now, the market is watching closely as the agreement unfolds. The next few weeks will determine whether Trump’s vision of a “rock-like” drop becomes a reality or if the “feather-like” descent is the more likely path. Regardless of the outcome, one thing is clear: the oil market is no longer a simple story of war and peace. It’s a multifaceted narrative involving technology, logistics, and global demand — a story that will take time to fully unfold.