Oil prices plunged on Tuesday after US president Donald Trump predicted the war in the Middle East could be over “soon”, reversing a surge that had pushed Brent crude to its highest level in more than three years.

Brent crude fell as much as 10 per cent to below $90 (£67.50) a barrel in early Asian trading on Tuesday, after hitting a session high of $119.50 on Monday – its highest since mid-2022.

US West Texas Intermediate dropped to $88.65 (£66.49), down 6.5 per cent on the day.

The drop came after Mr Trump told CBS that the war against Iran was “very complete” and that Washington was “very far ahead” of his initial four-to-five-week timeframe.

Iran’s Revolutionary Guards pushed back, saying Tehran, not Washington, would “determine the end of the war” and that it would not allow “one litre of oil” to leave the region if US and Israeli attacks continued.

Mr Trump later warned on Truth Social that Iran would be hit “twenty times harder” if it moved to block oil shipments through the Strait of Hormuz, which handles one-fifth of the world’s oil supply.

Prices had already begun retreating after Russian president Vladimir Putin held a call with Mr Trump and shared proposals aimed at a quick settlement to the war, according to a Kremlin aide.

Mr Trump also said Washington would waive oil-related sanctions on “some countries” – a move that could open the door to further easing of restrictions on Russian crude – after his call with Putin.

The restrictions on oil flows in the Middle East has seen India and China, two of the biggest energy consumers, ramping up their Russian oil purchases. The US has said it will “allow” such purchases to be made sanction-free for up to 30 days.

Asian markets rallied sharply on Tuesday morning. Japan’s Nikkei 225 jumped 3.6 per cent and South Korea’s Kospi surged 6.4 per cent, prompting the Korea Exchange to trigger a trading curb after futures rose more than 5 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.6 per cent. Indian benchmarks were also eyeing recovery.

It followed one of the most volatile sessions in recent memory on Monday, when oil surged as much as 29 per cent during intraday trading before pulling back, stock markets plunged and then rebounded, and bond yields spiked on inflation fears before retreating.

“While all of this has helped ease some of the short-term panic, it’s hard to reconcile the idea of the conflict being ‘very complete’,” Tony Sycamore, a market analyst at IG in Sydney, told Reuters on Tuesday. He predicted crude could trade in a wide range of roughly $75 (£56.25) to $105 (£78.75) in the sessions ahead as volatility persists.

Despite the glimmer of hope for a swift end to the conflict, the background remained tense on Tuesday. Iran named Mojtaba Khamenei, 56, as its new supreme leader following the death of his father Ali Khamenei – a choice analysts said signalled hardliners were firmly in control.

Large crowds rallied in support of the new leader in several Iranian cities later on Monday, though he is yet to be seen in public. Israel had previously said it would kill whoever succeeded the elder Khamenei unless Iran ended its hostile policies.

Gulf oil producers have been cutting output as the conflict disrupts regional shipping. Iraq slashed production at its main southern oilfields by 70 per cent to 1.3 million barrels per day over the weekend. Kuwait declared force majeure and began reducing output. Saudi Arabia has also started trimming production, sources said on Monday.

Analysts cautioned that the prices will take a while to go back to normal.

“It will take time to restart shuttered production, particularly in Iraq and Kuwait because of their oil field characteristics,” David Doherty, head of natural resources research at BloombergNEF, told The Independent on Monday. “The longer the strait stays closed, the longer the restart will take.”

If the conflict is resolved, he said prices should “come right back down toward the 60s.”

G7 nations said they were prepared to implement “necessary measures” in response to surging oil prices but stopped short of committing to release emergency reserves.