(CNN) — Oil prices fell swiftly on Tuesday after President Donald Trump fired Iran hawk John Bolton as national security adviser.
The surprise exit of Bolton prompted speculation that the tensions between the United States and Iran could ease, or at least that the chance of a military conflict had decreased.
Bolton was a strong proponent of the Trump administration’s “maximum pressure” campaign against Iran. That campaign was built on tough sanctions that caused Iran’s oil exports to plunge.
US oil tumbled as much as 2.2% to $57.30 a barrel immediately after Trump tweeted out the firing of Bolton. Crude bounced off those lows and was recently trading around $57.75 a barrel.
“This is a knee-jerk reaction given that Bolton has been so adversarial with Iran,” said Matt Smith, director of commodity strategy at ClipperData. “With his removal, there is an expectation there won’t be as much vehemence in the tit-for-tat with Iran.”
It’s not clear that Bolton’s departure was related to Iran policy. Trump was irked by reports that he had faced internal pushback from Bolton over his decision to host leaders of the Taliban at Camp David, multiple people familiar with his frustration told CNN. Trump announced on Saturday the meeting had been canceled.
Trump did not mention Iran in his tweet announcing Bolton’s firing. “I disagreed strongly with many of his suggestions, as did others in the Administration,” said on Twitter.
Bolton had been scheduled to deliver a briefing along with Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin in the White House later on Tuesday.
Earlier this year, tensions between the United States and Iran soared to levels that prompted fears of a war. Oil prices jumped as investors feared that attacks on oil tankers risked a disruption of shipments in the Strait of Hormuz, the move important place on the planet to the global supply of oil.
Iran’s oil exports have plunged by about 2 million barrels per day since the summer of 2018, according to ClipperData.
In spite of the standoff with Iran, oil prices have stumbled in recent months due to concerns about weak demand for energy driven by the US-China trade war and global economic slowdown.
The sudden nature of Tuesday’s drop in oil prices likely reflects the influence of trading driven by computer algorithms.
“Algo trading is more connected to Trump’s Twitter account than actual market fundamentals,” said Smith.
The US Energy Information Administration dimmed its outlook for oil consumption on Tuesday due to concerns about the economy. The agency now expects global oil demand will increase by 900,000 barrels per day this year, potentially marking the weakest growth since at least 2011.