Oil Markets Bet Trump Would Blink Before Crisis Hit

Oil markets made a bold bet at the start of the Iran war that President Donald Trump would not allow the conflict to escalate into an economic crisis.

The assumption was based on Trump's past behavior, where he has often retreated from extreme measures once financial markets began to wobble.

This 'Trump put' played out in commodity markets as well during the Iran war, with investors pricing in the president's limits and betting that a deal would be reached before things got worse.

The physical market responded remarkably effectively to the drawdown in global inventories, with governments and companies releasing hundreds of millions of barrels from commercial and strategic stockpiles.

However, despite the market's resilience, the loss of around 1.4 billion barrels of supply since the start of the war still punched a vast hole in global inventories, and the challenge now is that supply and demand are unlikely to recover in step, pointing to a period of volatility.