Trump Postpones Iran Strikes as Oil Markets Recalibrate
Five-day pause signals diplomatic shift after crude hit $113, forcing Fed to reassess inflation trajectory and rate cut timeline.
President Donald Trump postponed planned military strikes on Iranian power plants for five days on March 23, citing ‘very good and productive conversations’ with Iran over the preceding 48 hours—a dramatic reversal that came just hours after his 48-hour ultimatum expired.
The announcement triggered immediate volatility in Energy markets, with Brent crude settling at $113.21 per barrel and WTI at $98.81, according to CNBC. Both benchmarks remain sharply elevated from their February levels but well below the $126 peak Brent reached earlier in the crisis. Goldman Sachs now expects Brent to average $110 in March-April, a 62% jump from the 2025 average.
The postponement marks a tactical retreat from Trump’s March 22 ultimatum demanding Iran reopen the Strait of Hormuz within 48 hours or face obliteration of its energy infrastructure. Iran’s de facto blockade of the waterway—which carries 20% of global oil supply—has triggered an 8 million barrel per day supply contraction, per International Energy Agency estimates cited by FinancialContent.
back-channel negotiations accelerate
Jared Kushner and Steve Witkoff have emerged as the primary figures in hastily organised back-channel negotiations, according to Axios. The administration is seeking Qatar as mediator rather than Oman, which facilitated pre-war talks that reportedly made ‘substantial progress’ on a nuclear deal before Trump cancelled them on February 27—one day before launching strikes that killed Supreme Leader Ali Khamenei.
A significant impediment to progress: the administration remains uncertain who actually makes decisions within Iran’s fractured post-Khamenei power structure. The five-day window represents both opportunity and constraint—long enough to establish contact channels, short enough to maintain pressure without appearing weak domestically.
“I have instructed the department of war to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five day period, subject to the success of the ongoing meetings and discussions.”
— President Donald Trump
fed inflation calculus shifts
The postponement arrives as Federal Reserve policymakers grapple with energy-driven inflation pressures that threaten to derail their carefully calibrated rate cut timeline. At the March 18 meeting, Chair Jerome Powell characterised inflationary pressure as ‘murky’ and refused to rule out further hikes if energy-driven costs bleed into sticky core services, according to CNN Business.
The CME FedWatch tool showed a 12% probability of a 25-basis-point rate hike at the April meeting as of March 20—data that predates the strike postponement and may understate current market expectations. Futures markets implied a 48% probability of no Fed rate cut in 2026, up from 30% before the oil spike, per Morningstar.
The Fed’s March 18 decision to hold rates steady came before Trump’s de-escalation move. Policymakers lifted core inflation projections by 0.3 percentage points to 2.7% but declined to provide explicit forward guidance on oil price scenarios. Portfolio managers note the ongoing tension between inflation and employment mandates has become harder to assess amid Iranian supply disruption.
The uncertainty compounds existing challenges for monetary policy. Energy costs represent roughly 7% of the Consumer Price Index basket, but second-order effects through transportation and manufacturing costs could prove more persistent than headline fuel price swings.
strait of hormuz remains closed
Despite the diplomatic opening, Iran has not yet reopened the Strait of Hormuz. The waterway remains under effective blockade 23 days into the conflict, with tanker traffic at near-zero levels. Iranian officials have threatened to close the Strait completely and target regional energy infrastructure if strikes proceed—a posture unchanged by Trump’s postponement announcement.
The threat environment extends beyond the Strait itself. Regional producers including Saudi Arabia and the UAE face elevated risk of drone or missile attacks on export terminals, a scenario that could push Dubai crude—which peaked at $150 earlier in the crisis—to new highs regardless of Hormuz status.
- Trump postponed Iran strikes for five days citing productive back-channel conversations, reversing course hours after his 48-hour ultimatum expired
- Brent crude settled at $113.21, down from $126 peak but 62% above 2025 average; Goldman Sachs forecasts $110 March-April average
- Fed rate cut expectations collapsed as futures markets now price 48% probability of zero cuts in 2026, up from 30% pre-crisis
- Kushner and Witkoff lead hastily organised negotiations but face uncertainty over Iran’s post-Khamenei decision-making structure
what to watch
The five-day window will reveal whether Trump’s reversal represents genuine diplomatic breakthrough or tactical pause driven by domestic political pressure and market volatility. Key indicators include: any public statement from Iranian officials confirming dialogue; movement on Strait of Hormuz shipping activity; and whether Kushner successfully identifies credible Iranian interlocutors through Qatari channels.
Energy markets face asymmetric risk. A credible diplomatic framework could trigger rapid crude price normalisation toward $90-95 for Brent, unwinding recent Fed tightening expectations. Conversely, negotiation collapse after the five-day pause would likely send prices above the previous $126 peak, particularly if Iran follows through on threats to target regional infrastructure.
For the Fed, the March 18 projections are already stale. If diplomatic progress materialises this week, April’s policy decision reverts to pre-war assumptions about gradual disinflation. If talks fail, Powell faces the prospect of simultaneous supply shock and geopolitical crisis—a scenario that would force explicit acknowledgment of stagflation risk for the first time since the 1970s.