Oil prices pulled back from a gradual climb on Wednesday after President Trump announced he would pause his military escort operation through the Strait of Hormuz, prompting analysts to joke that the 'TACO' president was back. The Brent crude oil price slipped to $106 per barrel amid hopes of a deal between the US and Iran reaching a new phase, with analysts suggesting armed protection of ships in the Middle East was impractical.
Trump's Announcement
In an online post, Trump said that the military operation to escort shipping vessels through the trading route in the Middle East, a mission dubbed 'Project Freedom', would stop, although a blockade on Iran ports would continue. He wrote: 'Based on the request of Pakistan and other Countries, the tremendous Military Success that we have had during the Campaign against the Country of Iran and, additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran, we have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom (The Movement of Ships through the Strait of Hormuz) will be paused for a short period of time to see whether or not the Agreement can be finalized and signed.' Trump said the initial project was a 'humanitarian gesture' but then claimed 'great progress' towards a peace deal would mean that the operation would stop.
Market Reaction
The US and Iran have exchanged fire in recent days, though both sides have disputed claims their ships and boats had been attacked. Oil prices had been trading at around $115 per barrel while global stock prices had fallen until Trump made the announcement. The FTSE 100 index inched up by nearly two per cent within the first two hours of trading, while Asian and European stocks rebounded.
'TACO' Trump Returns
A number of market analysts said Trump's latest U-turn marked the return of 'TACO', or 'Trump Always Chickens Out', whereby large threats never come to fruition and instead lead to back-pedalling. 'There are three things certain in life – death, taxes and a TACO,' said Neil Wilson, Saxo UK investor strategist. 'No battle plan survives first contact with the enemy but 'Project Freedom' seems to have been dropped with unseeming haste.' US secretary of state Marco Rubio also said that its offensive on Iran, 'Operation Epic Fury', had also ended and that Trump was focused on achieving a peace deal with the country.
Ships in the Strait of Hormuz have remained on alert as French company CMA CGM said one of its vessels was attacked on Tuesday. Iranian media have reportedly claimed that Trump 'retreated' but the leadership has not issued a response. Some of the regime's surviving leaders are in China for talks on global relations.
