By Stephanie Kelly and Laila Kearney
NEW YORK, March 10 (Reuters) - Oil prices plunged over 13% on Tuesday after soaring to their highest levels since 2022 in the previous session after U.S. President Donald Trump predicted the war with Iran could end soon, lowering expectations of prolonged oil supply disruptions.
Brent futures fell $12.46, or 12.6%, to $86.50 a barrel at 12:58 p.m. EDT (1658 GMT), while U.S. West Texas Intermediate (WTI) crude fell $12.24, or 12.9%, to $82.53.
Both crude benchmarks
surged to more than $119 a barrel on Monday to their highest since June 2022 as supply cuts by Saudi Arabia and other producers stoked fears of major disruptions to global supplies.
Prices later retreated late on Monday and so far on Tuesday after Trump and Russian President Vladimir Putin had a call and shared proposals aimed at a quick settlement to the war, according to a Kremlin aide.
In addition, Trump said on Monday in a CBS News interview that he thought the war against Iran was "very complete" and Washington was "very far ahead" of his initial four- to five-week estimated time frame.
"Clearly Trump's comments about a short-lived war have calmed markets. While there was an overreaction to the upside yesterday, we think there is an overreaction to the downside today," said Suvro Sarkar, energy sector team lead at DBS Bank.
Israel's foreign minister said Israel is not seeking an endless war with Iran and will coordinate with the United States on when to end the fighting.
OIL SUPPLIES WON'T RETURN QUICKLY
Even if the war ends, oil supplies won't immediately rebound, said Simon Flowers, chairman and chief analyst at Wood Mackenzie.
"When the conflict ends, cranking up the supply chain won't be swift," Flowers said. "Product barrels in storage at refineries or in port might be moved on vessels quite quickly. But if wells are shut-in for a prolonged period, restarting production to full output could take weeks or even longer."
In response to Trump, Iran's Islamic Revolutionary Guard Corps said Tehran would not allow "one litre of oil" to be exported from the region if U.S. and Israeli attacks continued, state media reported on Tuesday.
Meanwhile, Trump is also considering easing oil sanctions on Russia related to Moscow's war in Ukraine, and releasing emergency crude stockpiles to help curb spiking prices, according to multiple sources.
"Discussions around easing sanctions on Russian oil, comments from Donald Trump hinting that the conflict could eventually de-escalate, and the possibility of G7 (Group of Seven) countries tapping strategic oil reserves all pointed to the same message - that oil barrels will somehow continue to reach the market," Priyanka Sachdeva, a Phillip Nova analyst, said in a note.
G7 energy ministers stopped short of agreeing on a release of strategic oil reserves on Tuesday and instead asked the International Energy Agency to assess the situation before acting.
THE WAR GOES ON
The U.S. and Israel pounded Iran on Tuesday with what the Pentagon and Iranians on the ground said were the most intense airstrikes of the war, despite global markets betting that President Trump will seek to end the conflict soon.
Saudi Arabia's Aramco, the world's top oil exporter, said on Tuesday there would be "catastrophic consequences" for the world's oil markets if the Iran war continues to disrupt shipping in the Strait of Hormuz.
Nearly 1.9 million barrels per day of crude refining capacity in the Gulf has been shut in due to the U.S.-Israeli war on Iran, consultancy IIR said on Tuesday.
"Policy measures may have limited impact on oil prices unless safe passage through the Strait of Hormuz is assured, given the potential losses of up to 12 million bpd over the next two weeks," JPMorgan said in a note.
In the latest disruption to global supplies, Abu Dhabi state oil giant ADNOC has shut its Ruwais refinery, a source said on Tuesday, after a fire broke out at a facility within the complex following a drone strike.
Goldman Sachs said because the situation remains fluid, it was not changing its oil price forecast for Brent at $66 per barrel in the fourth quarter and WTI at $62 per barrel.
(Reporting by Scott DiSavino and Laila Kearney in New York, Stephanie Kelly in London, Anushree Mukherjee in Bengaluru and Emily Chow in Singapore; Editing by Bernadette Baum, Emelia Sithole-Matarise, Jason Neely and Deepa Babington)
