Oil prices fell for the first time in six sessions after comments from US President Donald Trump eased immediate fears of a military confrontation with Iran. The retreat followed a strong run-up driven by geopolitical anxiety, underscoring the market’s sensitivity to political signals rather than changes in physical supply.

Brent crude slid as much as 2.9% to trade below $65 a barrel, while West Texas Intermediate hovered near $60. The move came after Brent had surged around 11% over the past week, largely on concerns that unrest in Iran - a key oil producer - could disrupt output or shipping through critical routes in the Middle East.

The immediate trigger for the sell-off was Trump’s statement that he had received assurances Iran would stop killing protesters. That comment reduced the perceived likelihood of an imminent US military response to the demonstrations against the government of Supreme Leader Ayatollah Ali Khamenei. For oil markets, this mattered because the earlier rally was built on the assumption that escalating violence could spill over into sanctions, strikes on infrastructure, or disruptions to key shipping lanes.

However, the broader situation remains far from stable. Iranian authorities temporarily closed airspace around Tehran, while the US reportedly redeployed some personnel in Qatar and near other American military bases in the region. These developments suggest that while an immediate attack may be off the table, Washington continues to position itself for multiple contingencies. Markets are therefore scaling back extreme scenarios rather than pricing in a return to full normalcy.

The recent strength in oil prices has not been driven by Iran alone. Crude entered the new year under pressure after five consecutive months of declines, as expectations of a global supply glut dominated sentiment. That narrative shifted as political turmoil resurfaced in OPEC’s fourth-largest producer and instability deepened in Venezuela. Together, these factors restored a geopolitical premium that had largely evaporated by late last year.

Trump also indicated renewed engagement with Caracas, saying he had a “very good call” with acting Venezuelan President Delcy Rodríguez that included discussions on oil. He added that he would support Venezuela remaining within OPEC. While no policy changes were announced, the comments signaled a softer diplomatic tone that markets interpreted as reducing the risk of abrupt supply shocks from the region.

At the same time, underlying fundamentals offered a counterweight to geopolitics. US crude stockpiles rose by 3.4 million barrels, the largest weekly increase since November, reinforcing concerns about oversupply. This inventory build provided traders with a tangible data point to justify taking profits after the recent rally, especially as fears of immediate conflict receded.

Market strategists remain divided on what comes next. Robert Rennie, head of commodity research at Westpac Banking Corp, said that geopolitically induced strength in Brent could persist, with a test of $75 a barrel possible if tensions flare again. At the same time, he cautioned that prices could fall sharply once an “all-clear” signal emerges or if Iran’s current political turmoil leads to regime change, drawing parallels with price swings seen during the Iran-Israel conflict in June.

For Indian markets, the pullback in oil prices offers short-term relief. Lower crude reduces pressure on India’s current account deficit, supports the rupee, and eases input costs for sectors such as aviation, paints, chemicals, and logistics. It also gives policymakers some breathing room on inflation management, particularly fuel-linked components.

From a sectoral perspective, oil marketing companies and downstream users stand to benefit if prices remain below recent peaks. Conversely, upstream producers may see earnings expectations recalibrated if geopolitical premiums continue to fade.