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

Trump’s Promise of Oil Price Relief Faces Reality Check

Trump says oil prices will drop – President Donald Trump has long positioned himself as a champion of energy independence, claiming that resolving conflicts in the Middle East would deliver swift and dramatic relief to American consumers. His recent assertion that oil prices would “drop like a rock” once the Iran war concludes and the Strait of Hormuz reopens has drawn skepticism from market analysts. While the geopolitical tension has eased slightly with the signing of a framework agreement on Friday, the reality of the oil market suggests that the price decline may be more gradual than promised.

From War to Stability: A Fragile Transition

Trump’s strategy hinges on the idea that securing a deal with Iran will restore normalcy to the region’s energy infrastructure. The agreement, which could lead to the dismantling of Iran’s nuclear program, marks a critical milestone. However, the promise of immediate economic benefits—specifically, a sharp drop in energy prices—has yet to materialize. The market’s response to the deal’s announcement reveals a disconnect between political progress and economic outcomes.

“Normal” — i.e. the sub-$70 Brent crude price from before the war — is just around 15 bucks away.

Despite the initial optimism, oil prices have already fallen significantly, but the futures market indicates a slower path to recovery. Futures contracts for the next year and beyond have shown minimal movement, even as the immediate-month contracts—those that directly influence daily oil price reports—plummeted by nearly $25 from their recent peak. This divergence highlights the complexity of global energy markets, where short-term volatility does not always reflect long-term trends.

Trump’s “drop like a rock” narrative is based on the premise that the Strait of Hormuz, a vital shipping route, will once again operate smoothly. The strait, which saw heightened activity during the conflict, is expected to welcome oil tankers carrying 200 million barrels of stranded crude. Yet, the logistical challenges of reopening the waterway remain formidable. Iran’s mining of the strait has narrowed the passage, forcing vessels to navigate through two precarious corridors—one along the Iranian coast and the other near Oman.

The Road to Reopening: Mines, Bottlenecks, and Time

Clearing the mines from the Strait of Hormuz is no small task. Even with the US Navy’s advanced minesweeping technology, the process of identifying and neutralizing the explosives will take weeks, according to experts. “The mines are a major and literal obstacle,” said Jakob Larsen, a safety & security officer at BIMCO, the world’s largest shipowner association. “Vessels must maintain extreme caution to avoid collisions or groundings.”

The strait’s restricted lanes could create a bottleneck, slowing the flow of oil and gas. This scenario might delay the return to pre-war pricing levels, as the market anticipates prolonged disruptions. While Trump envisions an immediate surge in supply, the reality is that the process of restoring full capacity is measured in weeks, not days. “The tanks in Cushing, Oklahoma, are hitting bottom,” noted one analyst, emphasizing that the oil market is at a critical juncture.

“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.”

Analysts warn that the concept of “normal” is subjective. For instance, the recent average gasoline price of $2.85 may no longer be the benchmark once global conditions shift. Niels Rasmussen, BIMCO’s chief shipping market analyst, estimated that it could take two months for the strait to resume normal operations. However, Kieran Tompkins, a senior commodities economist, described this timeline as “optimistic,” suggesting that the market may take even longer to stabilize.

Meanwhile, the immediate-month contracts have already seen a marked decline. Prices have fallen below $90, the lowest level in months, as traders factor in the reduced threat of supply shocks. Yet, the long-term outlook remains uncertain. Futures contracts, which are key indicators of market expectations, suggest that oil prices could remain above $70 for years, with a projected drop to that level only by late 2031. This timeline underscores the difficulty of reversing the current economic trajectory, even with diplomatic progress.

Challenges Beyond the Strait: Tensions and Insurance Costs

The threat of renewed conflict looms large over the oil market. Iran’s recent statements hinting at potential attacks on ships transiting the strait have already spiked maritime insurance rates. These costs, which cover risks like piracy and sabotage, have made shipping companies hesitant to commit to long voyages without assurances of stability. “Shipowners will not go ahead in significant numbers without a credible and stable ceasefire,” said Larsen, emphasizing the need for political certainty before the market fully rebounds.

Even as the strait prepares for reopening, the logistical hurdles are immense. A dozen oil tankers are already positioned near the waterway, ready to load crude. But this number is lower than the typical 100 ships that operate in the region, according to Vikas Dwivedi, a global oil and gas strategist at Macquarie Group. Dwivedi anticipates a surge in activity once the strait is cleared, though he estimates it could take 30 days to get the necessary vessels into place. “The pace of recovery depends on how quickly the market can adapt to new realities,” he added.

These challenges reflect a broader shift in the energy landscape. The war in the region has not only disrupted supply chains but also forced the market to reconsider its assumptions about price stability. While Trump’s rhetoric promises swift relief, the data tells a different story—one where the oil market’s recovery is as delicate as the geopolitical balance it depends on. The question now is whether the price drop will be as dramatic as Trump claims or if the market will settle into a new equilibrium.

Reassessing the Timeline: Politics, Logistics, and Market Psychology

The time between agreement and price relief is not just a matter of logistics. It also involves the psychological impact of prolonged uncertainty. Traders and investors have grown accustomed to volatility, and the market’s reaction to the deal’s announcement reveals a cautious optimism. The immediate drop in prices has been welcomed, but the long-term forecasts suggest a more measured recovery.

Analysts argue that the market’s patience is being tested. “The deal is a step forward, but the road to normalcy is longer than many expect,” said Rasmussen. The combination of geopolitical risks, supply constraints, and shifting demand patterns means that the price decline may not be as steep as Trump suggests. Even with the strait reopened, the market may need months to fully digest the implications of the deal.

As the oil market moves toward this new phase, the focus will be on how quickly the supply chain can normalize. The bottleneck created by the mines may persist, and the time required to clear them could delay the return of normal shipping patterns. For now, the only certainty is that the price of oil remains a topic of intense debate, with Trump’s promise of a sharp drop facing both hope and skepticism in equal measure.

The path to stability is complex, involving not just the removal of mines but also the rebuilding of confidence in the region. Until the market sees consistent, sustained price declines, the idea of oil prices falling like a rock may remain just that—a metaphor. For now, the oil market is navigating a delicate balance, with each step forward met by a recalibration of expectations.