Oil’s vertigo‑inducing slide from nearly 120 dollars a barrel to below 90 in less than a day is a textbook case of how fast a war‑driven risk premium can inflate, and then evaporate, once traders sense the worst‑case scenario may be off the table. A mix of de‑escalation signals from Washington, hints of coordinated government intervention and classic profit‑taking turned an historic spike into an equally dramatic pullback.
A roller‑coaster session: from panic to relief
Oil’s retreat came at the end of a day that began with outright panic.
- El País describes Monday’s trading as “a day of historic turmoil” in which Brent futures shot up 30 percent at the open to “almost 120 dollars a barrel” as fighting around Iran threatened Gulf exports.
- Anadolu Agency reports that Brent spiked as high as 119.50 dollars and WTI to 119.00 dollars, the first-time oil had traded above 100 since Russia’s full‑scale invasion of Ukraine in 2022.
By early afternoon in New York, stock markets were deep in the red on fears of a sustained oil shock. Then the narrative flipped.
Roughly 90 minutes before the closing bell, President Donald Trump told CBS News that the conflict with Iran was “very complete, pretty much”, language investors read as a sign Washington was not planning a wider regional war.
Within hours:
- Brent had plunged to around 90 dollars a barrel, down almost 25–30 dollars from its intraday peak.
- The US benchmark WTI dropped to about 85–89 dollars, a fall of roughly 30 dollars from its high.
- The Los Angeles Times notes that the drop from “nearly 120 back below 90” helped US stocks erase steep early losses and close higher on the day.
What looked like the start of a 1970s‑style oil shock ended, at least for now, as an intraday spike.
Factor 1: De‑escalation signals punctured the worst‑case scenario
The single biggest catalyst for the reversal was the perception shift on war risk.
Anadolu reports that crude was “down 4.2 percent at 87.2 dollars” for Brent and 3 percent at 88.3 for WTI by Monday evening GMT, “after US President Donald Trump said that the war with Iran ‘is very complete, pretty much’.” The Wall Street Journal similarly ties Brent’s slide below 90 and WTI’s fall to about 85 to Trump’s remarks broadcast by CBS.
Until those comments, traders were pricing in:
- Prolonged closure of the Strait of Hormuz, through which roughly a fifth of seaborne oil normally flows.
- The risk of direct attacks on tankers and additional strikes on Gulf export terminals and pipelines.
Trump’s “very complete” line, combined with reporting that Washington and its G7 partners were working on maritime security and energy back‑up plans, signaled that policymakers saw the operation as largely done, and were focused on containment rather than escalation.
In other words, the market had overshot on the upside when it feared an open‑ended war and corrected sharply once the tail‑risk of a multi‑month supply collapse looked less likely.
Factor 2: Strategic‑reserve talk and policy backstops
The second key driver was the sense that governments would not let the shock run unchecked.
Anadolu notes that oil’s dip below 90 coincided not just with Trump’s comments but also with signals from G7 energy ministers that they were prepared to release strategic reserves “to help offset the major supply disruption triggered by the Iran war.” The possibility of a coordinated IEA‑style release acts as a ceiling on panic: traders know that extreme price spikes invite barrels out of emergency stockpiles.
Goodreturns, summarizing views from Choice Institutional Equities, points out that current prices already embed a large precautionary demand premium: refiners and traders had been hoarding and building inventories in anticipation of shortages. If diplomatic moves reopen Hormuz and strategic stocks are tapped, analysts there argue Brent could “retreat towards 80 dollars” as that premium unwinds.
The mere threat of reserves being deployed, combined with quiet US waivers for some Russian cargoes bound for India earlier in the crisis, gives the market confidence that there is a policy floor under supply, even if parts of the Gulf remain offline.
Factor 3: Profit‑taking after a vertical spike
Once prices started to roll over, market mechanics took over.
Goodreturns reports that US WTI April futures dropped about 5 percent to 89.89 dollars, after touching an intraday high of 119.43 dollars, a fall of nearly 30 percent from peak to trough. Choice analysts estimate that WTI had crashed 29.3 percent from its March 9 high, describing the nearly 120‑dollar print as “the highest in many years.”
Such vertical moves are catnip for:
- Short‑term speculators locking in gains after a parabolic rally.
- Systematic funds whose models flip from buying to selling once momentum and volatility thresholds are breached.
The Wall Street Journal live blog notes that Brent’s near‑11‑percent intraday plunge “after Trump says war ‘pretty much’ complete” was amplified by this kind of positioning wash‑out. With everyone crowded into the same long oil trade, the exit door got crowded once sentiment turned.
In effect, the war‑risk bubble in crude burst as fast as it had inflated.
Factor 4: A re‑think on fundamentals and demand
Beneath the headlines, some of the fundamental story also shifted.
El País emphasizes that several Persian Gulf producers – including Iraq, Kuwait, and the UAE – had cut output because the closure of Hormuz and full storage tanks meant they simply couldn’t export more, even at high prices. Reuters reporting cited by Goodreturns puts Iraq’s cut at as much as 70 percent of normal exports.
Paradoxically, that physical constraint reduces the incremental bullish impact of each new disruption headline: if barrels are already stuck on shore, additional fears don’t immediately remove more supply from the seaborne market.
At the same time, early signs of demand strain are emerging:
- US labor‑market data have softened, casting doubt on the strength of the expansion just as fuel costs spiked.
- Equities were already selling off on recession fears, suggesting high prices could quickly morph into demand destruction if they lingered.
Analysts at Choice break the earlier rally into three phases – initial supply shock, hoarding‑driven precautionary demand, and a scarcity premium that forces demand destruction. Their view is that as soon as it became clear the crisis might stall before reaching that third phase, the huge precautionary layer could be peeled away, justifying a slide back under 90.
What the retreat means for markets and policy
Oil’s retreat has immediate and longer‑term implications.
On the market side:
- The LA Times and Wall Street Journal both highlight how the drop below 90 allowed stocks to rebound, easing fears of an imminent stagflation shock.
- Volatility remains extremely high; with intraday swings near 30 dollars, traders warn crude could easily whipsaw back into triple digits on any fresh escalation.
For central banks, sub‑90 crude is a reprieve. If prices had stayed near 120, plans for interest‑rate cuts this year would likely have been delayed. Now, policymakers can watch a few inflation prints before deciding whether the spike was a blip or the start of a new regime.
For governments, the episode is a reminder that communication moves markets. A few carefully chosen words from the US president, plus coordinated messages from G7 ministers, were enough to puncture a massive risk premium built on fear of the unknown.
Could prices spike again?
The short answer: yes.
Analysts stress that the underlying shock – war around a critical oil chokepoint – has not vanished. The Strait of Hormuz remains partially blocked, Gulf exports are disrupted, and Iranian and allied forces retain the capacity to target ships and infrastructure.
That means:
- Any sign that fighting is re‑intensifying, or that diplomatic efforts are failing, could send crude back into triple digits.
- Conversely, credible steps toward a ceasefire and a clear plan for reopening Hormuz could push prices closer to the 80‑dollar level some analysts see as consistent with unwinding most of the war premium.
For now, oil below 90 reflects a market that has re‑priced from panic to wary watchfulness. The underlying tensions remain, but traders have decided that, at least this week, 120‑dollar crude was a bridge too far.
