Oil prices staged a dramatic about-face on Monday, sliding from $112 (£83) to $109 per barrel after President Donald Trump announced he was postponing a military strike on Iran - at the request of some very concerned Gulf leaders. Because nothing says 'decisive leadership' like letting your allies talk you out of a bombing run.
The global benchmark Brent crude had been on a rollercoaster all day, swinging wildly after Trump warned Iran on the weekend that 'the clock is ticking,' with peace talks apparently stalled. You know, the usual diplomatic language of 'surrender or else.'
Energy markets have been in a frenzy ever since Iran effectively closed the Strait of Hormuz - the narrow waterway through which about a fifth of the world's oil and liquefied natural gas flows - in retaliation for US and Israeli strikes that began on 28 February. So, one of the world's most vital shipping lanes is closed, and markets are reacting to every hint of progress or lack thereof with the enthusiasm of a caffeinated squirrel.
Early Monday, crude rose after Trump posted on Truth Social that Iran had 'better get moving, FAST, or there won't be anything left of them,' adding 'TIME IS OF THE ESSENCE!' Because nothing says 'diplomacy' like threatening total annihilation in all caps.
The president had previously warned that the ceasefire was on 'massive life support' after rejecting Iran's demands as 'totally unacceptable.' According to Axios, Trump was expected to meet with his top national security advisers on Tuesday to discuss military options. Because what better way to resolve a conflict than to schedule a meeting about bombing someone?
But then, oil prices fell back after reports that an Iranian news agency said the US had accepted a temporary waiver on sanctions for Iran's crude oil during negotiations. Who knew that a little sanctions relief could calm the markets faster than a threat of force?
Later on Monday, Trump announced that 'serious negotiations are now taking place.' In a Truth Social post, he revealed that the leaders of Qatar, Saudi Arabia, and the United Arab Emirates had asked him to hold off the attack planned for Tuesday. Trump said he was informed a deal 'very acceptable' to the US would be made, adding 'NO NUCLEAR WEAPONS FOR IRAN!' - because shouting in caps is the cornerstone of statecraft.
But he warned that the US military was prepared to 'go forward with a full, large scale assault of Iran, on a moment's notice' if no acceptable deal is reached. So, the plan is still to bomb, just maybe not today.
Iran has not publicly commented on Trump's latest statement. Perhaps they're too busy wondering if the US is serious or just playing a very high-stakes game of chicken.
The conflict has also sent government borrowing costs soaring, as measured by bond yields. On Monday, the benchmark 10-year US Treasury yield hit 4.63% at one point - its highest level in over a year - before falling back. Japanese bonds also jumped after Reuters reported the government there planned to issue fresh debt for an extra budget to cushion the war's economic blow. The 30-year Japanese government bond yield rose to a record 4.2%, while the 10-year hit 2.8%, the highest since October 1996. Eurozone bond yields started higher but fell back as oil prices declined.
The moves came as G7 finance ministers met in Paris. ECB head Christine Lagarde, asked if she was worried by the global bond sell-off, replied: 'I always worry, that's my job.' At least someone's being honest.
Claudio Galimberti, chief economist at Rystad Energy, told the BBC that high oil prices are 'a very dire situation and it's going to get worse unless the strait is opened.' He added, 'We are approaching a summer of pain, I am afraid, unless Hormuz is opened.' So, pack your sunscreen and prepare for economic misery.
Higher oil prices have hit airlines, many entering peak holiday season. Ryanair reported its full-year results on Monday, stating: 'The conflict in the Middle East has created economic uncertainty and we still don't know when the Strait of Hormuz will reopen.' The carrier secured contracts to fix prices for 80% of its jet fuel, but the remaining 20% 'has spiked due to the Middle East conflict.' Ryanair's profits rose to €2.26bn (£2bn) from €1.6bn last year, with sales up 11% to €15.5bn for the year to the end of March. But the outlook is 'difficult to predict' due to the Iran war and the ongoing Ukraine conflict. Because why have one war when you can have two?
During the conflict, Iran has launched attacks on neighboring countries including Israel, Bahrain, and the UAE. On Sunday, the UAE said a drone strike caused a fire near its Barakah Nuclear Power Plant in Abu Dhabi, calling it a 'dangerous escalation.' The defence ministry said three drones entered from the 'western border direction'; two were intercepted, but the third struck an electrical generator outside the inner perimeter, sparking a fire. No injuries were reported, and there was no impact on radiological safety. So, the nuclear plant is fine, but the region is still a powder keg.