From the April threat that sent oil up 7% in a single day to the October warning that barely stirred prices, Trump's repeated reversals on US-Iran talks have exhausted market trust over seven months. Traders have turned to anchoring on hard data such as cargo flows, and heavy position-cutting has drained liquidity, allowing algorithmic trading to step in. Physical supply and other hard data have formally replaced political rhetoric as the new anchor for crude oil pricing.
The crude oil market's sensitivity to Trump's remarks is systematically fading. A single tweet threatening Iran once sent oil surging 7% in a day, but similar statements now barely move the market. According to Bloomberg's analysis of price movements, as the US-Iran conflict drags on, Trump's words have significantly less influence on the global crude market. On April 1 this year, Trump vowed in a televised address to strike Iran and send it back to the Stone Age, sending oil prices soaring in Asian morning trade to close up more than 7%, above $109 per barrel. Yet on October 1, when Trump again warned Iran to sign a ceasefire or cease to exist, crude prices barely budged. The same threatening language produced vastly different market reactions.
According to an October 8 Bloomberg report, crude traders interviewed said they no longer focus on White House rhetoric and instead pay closer attention to physical supply changes and hard data such as cargo flows. At the same time, given the highly unpredictable nature of US war strategy, traders are actively reducing their position sizes. This shift not only affects energy markets but will further blur the inflation outlook and have knock-on effects on global interest rate policy direction.
From universal response to desensitization: seven months of eroding trust
In the early days of the Iran war, every word from Trump gripped crude traders' nerves. The specter of a Strait of Hormuz blockade long loomed over the market, repeatedly priced in as a worst-case scenario. As that nightmare partially materialized, with shipping through the waterway nearly grinding to a halt, global energy markets suffered a severe shock. Yet over the following seven months, Trump repeatedly hinted at progress in US-Iran diplomatic talks or an imminent deal, only to quickly reverse course. He also floated the idea of charging fees for Strait of Hormuz transit, only to abandon it within a day. The back-and-forth policy signals led traders to gradually view his remarks as unreliable price guidance.
"For months, headlines have been spinning like a carousel," said John Kilduff, a partner at Again Capital. "Trading this market now is basically playing geopolitical roulette. Everyone I talk to is cutting their trade sizes." Rob Thummel, senior portfolio manager at Tortoise Capital Advisors LLC, also noted: "The White House's flip-flopping has left traders collectively paralyzed."
Narrowing price swings, liquidity crunch
As traders step back to the sidelines, crude oil's intraday price swings are also contracting. According to Bloomberg's analysis of intraday price movements, the high-low spread each trading day is now far smaller than in the early days of the war, and fewer strikes on energy infrastructure have further suppressed market volatility. More alarming is the liquidity crisis. Open interest in Brent crude futures contracts has fallen to its lowest level since March 2025. The shrinking market depth means that if a sudden event occurs, prices could face more severe and irrational swings. When rhetoric-driven volatility fades, the market sometimes becomes a hunting ground for algorithmic trading. Commodity trading advisors (CTAs) and other algorithmic traders, whose main strategy is momentum-following, often amplify price swings in both directions. Although such swings usually normalize before the trading day ends, they can cause severe divergence between physical and paper markets in the process and push traditional investors further to the sidelines.
Supply data replaces presidential tweets as the new anchor
As Trump's remarks lose their pricing power, physical supply indicators are filling the void. Traders are turning their attention to cargo flows, pipeline data and other hard indicators that can be tracked in real time and acted upon directly. "The president says a lot, and his positions change quite frequently," said Michael O'Rourke, chief market strategist at JonesTrading Institutional Services LLC. "After several rounds of headline shocks, the market does become desensitized. Now everyone is clearly more focused on physical flow data because it's real-time and actionable." Even analysts admit they can no longer build effective models for the war's trajectory. JPMorgan analysts wrote in a recent research note: "We simply don't know how to model the outcome. In the early days of the war, we thought we did."
Energy shock spills over, macro impact far-reaching
This Iran conflict has triggered the worst oil supply shock in history. Combined with Ukraine's sustained strikes on Russian refining facilities, retail fuel prices in many parts of the world have risen to historic highs. Central bank officials in Europe and elsewhere have voiced concerns about stubborn inflation driven by surging energy costs, and oil price movements have become deeply embedded in the pricing logic of bond and equity markets. In the US, elevated energy prices are putting political pressure on Trump's Republican Party, casting a shadow over the prospects for November's midterm elections. Reduced visibility in the crude oil market will directly blur the global inflation path and further affect central banks' room for interest rate decisions. When one of the market's most important price signals falls into chaos, its spillover effects will extend far beyond the energy sector itself.
Nevertheless, most traders also acknowledge that Trump's statements cannot be entirely ignored, as he is ultimately the final decision-maker on military deployments and the direction of the Iran war. But until clearer signals emerge from outside the White House, most speculators are choosing to stay on the sidelines and wait for physical supply data to provide direction.
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