US President Donald Trump's trademark ability to talk down oil markets with a few words is fading as the Iran war drags on, leaving global energy prices far more exposed to escalation.
The Republican president's so-called "jawboning" was one of the defining features of the Iran conflict's early months after fighting erupted in late February.
In the months before the short-lived July ceasefire, Trump's repeated public statements and social media posts that said Washington and Tehran were edging toward a deal to end the conflict and reopen the Strait of Hormuz helped keep oil prices well below record highs. That rhetoric appeared to work even as the blockage of the chokepoint, which previously handled about a fifth of global oil supplies, upended energy markets.
Trump repeatedly predicted during the months of Israeli-US airstrikes that oil prices would "drop like a rock" once a ceasefire deal with Iran is reached.
Traders likely deemed it too risky to bet against Trump's desire to avoid a domestic fuel price spike. As stockpiles deteriorated, they assumed the US president would pull back and end the war quickly.
That bet appeared to pay off until markets learned the limitations of Trump's control. The July ceasefire broke down, giving way to a protracted, low-level conflict that has spread throughout the region, including the recent escalation in violence between Yemen's Iran-aligned Houthis and Saudi Arabia.
This lack of market confidence is now undermining the US president's efforts to bring down soaring diesel prices, a key priority before US midterm elections that are only three weeks away.
For energy markets, the era of the Trump trade may be over.
FADING EFFECT
Global benchmark Brent crude prices have held stubbornly above $100 a barrel for most of the past few weeks, despite a strong recovery in oil flows through the Strait of Hormuz.
Crude exports through the critical waterway have rebounded to roughly 80%-90% of pre-war levels, according to ship-tracking firms, as Gulf producers have increasingly relied on US naval protection to move cargoes.
Yet repeated efforts by Trump and US Energy Secretary Chris Wright to calm markets by highlighting the recovery in flows have not proven effective.
Brent did slip below $100 a barrel on news of the surge in crude flows, but that reprieve proved brief as Middle East violence continued to spread, including stepped-up Iranian strikes on tankers.
Meanwhile, shipping oil through the region remains very costly because of soaring tanker chartering costs and insurance premiums, as well as the complicated logistics required to get crude out of the region. The Trump administration can't "talk" those realities away anymore.
It turns out that increasing flows is one thing. Convincing traders that supplies will remain secure is much harder.
WORDS ARE CHEAP
Nowhere is that more evident than in the diesel market.
The combined impact of the Middle East conflict and Ukraine's drone campaign against Russian energy infrastructure has sharply reduced global refining capacity, limiting gasoline, diesel and jet fuel output.
US diesel prices have climbed to fresh records of $6.50 a gallon, while US gasoline prices remain elevated, worsening a cost-of-living squeeze that has become a major political challenge for Trump ahead of the November 3 elections.
It is therefore no surprise that the administration has spent much of the past few weeks searching for ways to cool the diesel market.
Trump last week announced an agreement with President Vladimir Putin under which Russia would resume some diesel exports to ease the global shortage. Washington also relaxed certain sanctions to facilitate the shipments, drawing criticism from both Republicans and Democrats.
"Between our TOTAL CONTROL of the Strait of Hormuz, and this great announcement on Russian Energy, Diesel Prices for Americans and, indeed, the World, will be COMING DOWN, IN RECORD NUMBERS, AND FAST!" Trump wrote on Truth Social on October 9.
But the volumes involved are modest. The total promised Russian exports over the next three months, according to Trump, amount to around 15 million barrels, equivalent to only about half of one day's global diesel consumption.
Trump also announced on Sunday an energy infrastructure ceasefire between Russia and Ukraine, although neither side has publicly confirmed adherence to the agreement.
All this comes after the administration took additional steps to ease domestic shortages, including pressing Europe to accelerate the release of emergency diesel stocks and relaxing restrictions on the use of certain diesel grades.
Yet so far, Trump's "diesel diplomacy" has had only a limited effect. US wholesale diesel prices were flat on Monday, European diesel futures dropped 2% while Brent rose around 2% to nearly $107 a barrel.
HARSH REALITIES
The muted market response reflects a deeper problem. The loss of around 2 million barrels per day (bpd) of refining capacity in Russia and the Middle East, and the sharp drawdown in global oil inventories since the start of the Iran war, have left energy markets in a precarious position that cannot be fixed through rhetoric or relatively small supply additions.
A halt to Ukrainian attacks on Russian refineries could eventually allow Russia, the world's second-largest diesel exporter, to restore larger export volumes. But repairing damaged refineries and export infrastructure will take months, if not years. Markets simply don't believe Trump has the ability to bring about a resolution.
The president can still move energy markets with his words, but that power has clearly weakened as the web of conflicts has become more complicated. For energy investors, traders and producers, talk and even action are no longer sufficient. They need trust in Washington's willingness and ability to find a durable solution - and that is in very short supply.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)