Crude sank nearly 11% as energy strikes pause cools worsened supply fears

Oil prices reversed by nearly 11% on Monday as markets scaled back geopolitical risk following US President Donald Trump’s decision to delay potential strikes on Iranian energy infrastructure, alongside signs of progress in diplomatic engagement. The shift came just ahead of a key deadline that had raised concerns over a broader escalation in the four week conflict.

Brent crude dropped $12.25, or 10.9%, to settle at $99.94 a barrel, pulling back from Friday’s close, its highest level since July 2022, while WTI declined $10.10, or 10.3%, to $88.13 a barrel.

The correction highlights how quickly risk premium has been priced out, with both benchmarks seeing 30 day futures volatility climb to levels last observed in April 2022. Downstream, US gasoline and diesel futures fell by roughly 10%, reversing gains from the prior session’s multi year highs.

Trading remained volatile throughout the day. Prices initially slid close to 15% before recovering part of the losses as Iran stepped up its rhetoric and military posture, launching fresh strikes across the region while rejecting claims of negotiations with Washington. Tehran also warned it could target Israeli energy assets and infrastructure linked to US operations in the Gulf if tensions escalate further.

Even with the pullback, the supply outlook remains fragile. Damage to key Gulf facilities and ongoing disruption through the Strait of Hormuz, which accounts for around 20% of global oil and LNG flows, continue to underpin market risk. Some cargoes have moved, including LPG shipments from the UAE and Kuwait to India, but overall traffic remains heavily restricted. Market estimates still point to potential supply losses of 7-10 million b/d, leaving crude highly reactive to further developments.

Written by: Farid Muzaffar