Crude oil benchmarks are under intense selling pressure and currency markets are reversing direction after US president Donald Trump told CBS News “I think the war is very complete, pretty much”.
Trump said Iran had made a “big mistake” in choosing Ayatollah Ali Khamenei’s son Mojtaba to be the country’s next supreme leader, warning “I don’t know if it’s going to last. I think they made a mistake,” but stopped short of repeating the sort of regime change demands made earlier in the US-Israeli campaign against Iran. “They have no navy, no communications, they’ve got no air force. Their missiles are down to a scatter. Their drones are being blown up all over the place, including their manufacturing of drones,” he said. “If you look, they have nothing left. There’s nothing left in a military sense.”
Brent crude, which hit $130 a barrel overnight, had already retreated on expectations of a co-ordinated G7 strategic petroleum release, and is now plunging below $85. Trump’s remarks will reinforce expectations that the geopolitical risk premium in front-month contracts has further to deflate, particularly if diplomatic channels open in coming weeks.
In currency markets, the shift in tone should ease demand for safe havens and commodity-linked units. The dollar, beneficiary of the initial flight to safety and a sustained rotation into energy exporters, faces modest headwinds as traders reprice tail risks downward. The Canadian dollar, which had drawn support from elevated crude prices even as domestic fundamentals weakened, could find itself caught between a fading energy bid and rising risk appetite. More consequential moves may come in major importing currencies: the euro, pound and yen all stand to climb in coming days as traders pare hedges against a sustained commodity price shock.
The broader question for markets is whether Trump’s apparent retreat from maximalist regime change rhetoric reflects a genuine shift in war aims or merely an attempt to declare victory while hostilities continue at lower intensity. A durable de-escalation could reduce pressure on oil curves, help restrain inflation expectations, and drive a mean-reversion process across the currency landscape. A return to open warfare could trigger another flight to safety, punishing those who moved too quickly to fade the war premium.
It is not over till it is over—of course—but for now it is reasonable to think tensions could ease in coming days and weeks, allowing the global economy to sidestep another blow.