Oil prices plummet sharply. The Iranian president states that Iran is willing to end the war. Will Trump compromise under tough conditions?

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Source: Energy Research Center

Outlook

On April 1, how many people still remember that this day is April Fool’s Day.

At 00:37 Beijing time, a message from Iranian President Pezeshkian saying Iran is willing to reach a ceasefire caused oil prices to plunge instantly. This is a pivotal time point, meaning both the United States and Iran have officially expressed their willingness to stop the fighting. After the news broke, global oil prices crashed sharply. Domestic SC crude oil futures also went hard against expectations, dropping by more than 10% at one point. On the other side, gold and silver and U.S. stocks surged across the board. The market therefore made clear adjustments to expectations for how geopolitical risk would evolve. This also reflects the widespread hope worldwide that the war will end as soon as possible and that peace and stability will be restored. Although the ceasefire remarks by the Iranian president come with clearly difficult preconditions, they still set the tone for oil price movements and gave the market a key signal. In the early hours, Trump said regarding the Iran war that this conflict is about to end. That night, the statements from the two leaders substantially eased the risk of oil prices running out of control.

In this war, the credibility and image of the best trader were badly damaged, but no one can ignore the enormous influence he has brought to the market. Although on Monday Iran’s parliament successfully passed a bill on strait tolls—essentially a direct slap in the face—previously, Trump, the U.S. president, who had been ready to “solve it in 2 minutes,” no longer mentioned threats to Iran. In an interview with CBS News, he said, “Not yet prepared” to give up efforts to force Iran to reopen the Strait of Hormuz. Everyone, take a careful look at this sentence.

As the Iran war continues and the effective disruption of transportation through the Strait of Hormuz still persists, more and more institutions have raised their oil price targets in their outlooks for extreme scenarios to 150–200 dollars. This is an objective reflection of the market’s concern that geopolitical developments may spin out of control, caused by the ongoing closure of the strait leading to a continuous accumulation of supply disruptions. This is also exactly the scenario that the Trump administration is very worried about. Therefore, on Tuesday during the early Asian trading session, news spread that Trump is willing to end the Iran war with the Strait of Hormuz closed. Oil prices showed a clear pullback from high levels, falling by more than $4 at one point. If Trump truly made such a decision, it would mean he would rather accept the loss of control over the Strait of Hormuz than take the risk of high oil prices. Given Trump’s nature as a businessman, the market still paid close attention to this possibility after the news emerged.

As for the Strait of Hormuz, Iran’s foreign minister said the Strait of Hormuz is “fully open,” with only the parties participating in the Iran war being closed off. The Iranian side has taken all necessary measures to ensure the safe passage of ships from friendly countries through the strait. He pointed out that after the war ends, the situation in the Strait of Hormuz will be jointly decided by Oman and Iran. From Iran’s perspective, the Strait of Hormuz can become a corridor of peace, for the peaceful use of ships from all countries. In the early stages of the war, Bridgewater Associates founder Ray Dalio made a clear statement: losing control of the Strait of Hormuz means the United States has lost this war, marking the beginning of the decline of this empire.

U.S. Defense Secretary Hegseth said that the coming days will be decisive moments in the Iran war. Yes, this is the key week: the U.S. is still sending a third aircraft carrier strike group to the Middle East, and the U.S. and Iran have not ceased fire. Moreover, the disagreements over ceasefire conditions between the two sides remain huge. Iran’s foreign minister Aragchi said the current situation is “not negotiation,” but rather an exchange of information through direct channels or “regional friends.” However, this does not mean negotiations have started; the relevant exchanges are mainly “warnings or exchanging views.” He said that currently Iran is not holding talks with any specific party, and that the information-exchange work is carried out by the foreign ministry in coordination with security agencies and is strictly advanced within official frameworks under the supervision of the government and the Supreme National Security Council. Aragchi emphasized that Iran has not responded to any of the 15 proposals put forward by the United States, nor has it proposed any proposals or conditions. Iran has not yet made a final decision on negotiation principles, but Iran’s conditions for ending the war are “very clear”: Iran “will not agree to a ceasefire,” but will demand “the complete end of the war across the entire region.” When discussing the regional situation, Aragchi said, “The Iranian people cannot be threatened,” and the U.S. president must respect the Iranian people. President Pezeshkian, while expressing Iran’s “necessary willingness” to end the war, stressed that the prerequisite is for the other side to meet Iran’s demands, especially to provide the necessary guarantee that it will no longer invade. Israel is expected to believe that Iran’s response to U.S. conditions will lead to a breakdown of talks. For now, we also find it hard to imagine how agreement can be reached between the U.S. and Iran when the gap between the conditions each side proposes is so large.

Time really has come to a very critical week. Iran’s foreign minister emphasized that Iran is “ready to respond to any ground conflict,” and warned enemies not to make mistakes in their strategic calculations. It can be expected that negotiations in a context with huge differences are bound to be difficult, and the process will most likely see repeated twists and turns. Navigation through the Strait of Hormuz will still take time as well, meaning oil prices will still not lack for large fluctuations. But since both sides have a willingness to reach a ceasefire, that will become the anchor for the short-term logic: cooling down is the main theme in the short term. Given that the market still faces uncertainty, investors may consider an options strategy to strengthen risk control and participate cautiously.

Daily Updates

【1】WTI front-month crude oil futures closed down by $1.5, a decline of 1.46%, to $101.38 per barrel; Brent front-month crude oil futures closed down by $3.42, a decline of 3.18%, to $103.97 per barrel; INE crude oil futures closed down by 7.39%, to 693.9 yuan.

【2】The U.S. dollar index fell by 0.62%, to 99.88; Hong Kong Exchanges and Clearing dollar-to-renminbi exchange rate fell by 0.08%, to 6.8759; U.S. 10-year Treasury yields rose by 0.24%, to 111.03; the Dow Jones Industrial Average rose by 2.49%, to 46341.51.

Recent Headlines

【1】【U.S. media: Trump is willing to end the Iran war with the Strait of Hormuz closed】According to the Wall Street Journal, U.S. government officials said that President Trump has told his aides that even if the Strait of Hormuz remains basically in a closed status, he is willing to end U.S. military actions against Iran. This move could prolong Tehran’s firm control over the waterway and leave the complicated task of reopening the strait for later handling. Recently, Trump and his aides have assessed that the mission to clear this choke point will push the conflict beyond his set timeline of four to six weeks. Trump has decided that the United States should achieve the main goals of weakening Iran’s navy and missile stockpiles, gradually end the current fighting, and at the same time put pressure on Iran through diplomatic channels to demand the restoration of free trade. Officials said that if this fails, Washington will pressure Europe and allies in the Gulf region to take the lead in reopening the strait. They said Trump could also choose a military option, but it is not his current priority.

On March 31, Iranian President Pezeshkian said Iran has a “necessary willingness” to end the war, provided the other side meets Iran’s demands, especially by providing the necessary assurances that it will not invade again. According to Iran’s official Mehr News Agency (Guangming?), on that day Pezeshkian said in a phone call with the president of the European Council, Kosta Ton, that the solution to normalize the situation is to stop the U.S. and Israel’s aggressive attacks. He reiterated that Iran has not sought to escalate tensions and war at any stage and that it “has the necessary willingness to end this war.” Pezeshkian pointed out that Iran entered negotiations with the United States with sincerity and a constructive attitude, but suffered an illegal attack in the middle of the talks. This issue shows that the United States does not believe in diplomacy, but is only “seeking to give orders to realize its greedy ambitions.” (Xinhua News Agency)

【2】【Core obstacles to U.S.-Iran diplomatic efforts: Iran’s decision-makers are unidentified】

(1) According to CNN, a U.S. special envoy is preparing to make another diplomatic contact with Iran, but one core issue remains unresolved: whether the Iranian officials they contact have enough authority to reach an agreement. U.S. and Gulf region officials said the U.S. does not know whether the regime figures receiving the information have the final authority to sign a peace agreement, let alone to implement it.

(2) Given the unclear identities of decision-makers within the Iranian regime, the U.S. government is adopting a broad net strategy, looking for officials that it can talk to. A person familiar with the developments said that obtaining a near-term response from that country is not easy, so more time needs to be reserved as a precondition for subsequent dialogue.

(3) U.S. and regional officials said that although the likelihood of face-to-face talks this week is low, both sides have so far treated this round of talks seriously.

【3】Since August 2022, the average gasoline price in the United States has first broken through $4 per gallon. As the world’s largest economy, this has become the most direct reflection of the pain the Iran war is causing U.S. consumers. According to data from the American Automobile Association, on Monday, the average retail price of regular unleaded gasoline across the U.S. rose to $4.018 per gallon. Since the war broke out, U.S. gasoline prices have jumped by more than $1. And just the day before the U.S. and Israel launched attacks on Tehran, this price was still at $2.98.

The war between the U.S. and Israel against Iran has shaken global energy markets. With the Strait of Hormuz basically under blockade, crude oil and fuel prices have surged relentlessly. On Monday, WTI crude oil’s closing price first climbed above the $100 per barrel mark since 2022, while products used daily by consumers—such as gasoline and diesel—have risen even more sharply. At present, the retail price of diesel has already surpassed $5.40 per gallon, becoming a key pain point dragging down the overall economy.

In this midterm election year, the surge in retail gasoline prices has brought significant political risk to the White House where President Trump is based. In addition, the surge in oil prices has made the challenges faced by the Federal Reserve even more difficult, especially since the Fed chair Powell and policymakers are trying to find a balance between controlling inflation and maintaining employment.

The ever more expensive oil prices at U.S. gas stations are, in fact, a microcosm of global oil price increases since the outbreak of the war. Earlier this month, Japan’s gasoline prices hit a historic high. In other regions, fuel shortages even emerged; some gas stations in Australia reportedly have no fuel left. Gasoline prices in Sri Lanka and Thailand have also surged dramatically.

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责任编辑：赵思远