From a surge of nearly 30% to a drop of 10%, the crude oil market has experienced an extreme reversal. Where are oil prices headed next?

Market Fluctuations!

On March 9 (Monday), crude oil prices surged by 29%, but on March 10 (Tuesday), there was a reversal.

On March 10, both Brent and WTI crude oil prices plummeted. Brent briefly fell below $90 per barrel and, at the time of writing, was down over 7%, dropping to $90 per barrel. WTI fell to $87 per barrel.

This epic reversal was not without warning. On March 9, Brent and US WTI crude oil prices surged nearly 30%, approaching $120 per barrel. However, after news broke that G7 finance ministers were discussing a potential coordinated release of oil reserves under IEA guidance, the gains retreated to around 10%.

The root cause of this extreme market reversal may be attributed to remarks by U.S. President Trump.

According to CCTV News, on March 9, U.S. President Trump stated that military actions against Iran would “end soon,” but when asked if it might conclude by the end of the week, he replied “no.” He claimed the conflict was “basically over” and that progress was “much faster” than the expected 4 to 5 weeks.

He also said that if Iran affects global oil supplies, the U.S. would respond more forcefully; and that when the time is right, the U.S. Navy would escort ships through the Strait of Hormuz. To stabilize rising international oil prices caused by the conflict, he announced plans to lift some oil-related sanctions.

Shenwan Hongyuan Futures analyst analysis indicated that the U.S.-Iran situation remains the short-term focus. The signals from the U.S. about “approaching the end of actions” and “lifting some sanctions” eased tensions, leading to a significant overnight decline in oil prices.

Zhejiang Merchant Futures senior researcher Zhang Zeyu told Jiemian News that the sharp drop in crude oil on March 10 was mainly influenced by two factors: first, the G7 decided to release oil reserves at an appropriate time to suppress prices; second, Trump’s speech suggesting that the U.S. and Israel’s military operations against Iran were progressing smoothly and would soon cease.

Jiemian News noted that prior to this, exchanges and multiple institutions had actively issued risk warnings. The Shanghai Futures Exchange and its Shanghai Energy Exchange subsidiary repeatedly adjusted the trading margin ratios and price limits for futures contracts related to crude oil, low-sulfur fuel oil, petroleum asphalt, and butadiene rubber, as well as trading limits for crude oil and low-sulfur fuel oil futures, aiming to curb speculation and prevent risks, cooling an overheated market.

Researcher Feng Jie from Galaxy Futures also stated that ongoing Middle East geopolitical conflicts, combined with the closure of the Strait of Hormuz and storage pressures, led several oil-producing countries to announce production cuts, further driving up prices of crude oil and related energy commodities like fuel oil, low-sulfur fuel oil, petroleum asphalt, and butadiene rubber. The prices of these commodities are significantly affected by the geopolitical tensions, which remain highly uncertain. In the short term, price volatility is much higher than historical averages, and if the situation eases, prices could fall sharply.

On March 10, the domestic market also responded. By the close, shipping and energy commodities led declines. The container shipping index (European route) futures main contract fell nearly 14%, crude oil futures dropped over 10%, and methanol, caustic soda, and ethylene glycol futures contracts declined more than 5%.

Zhang Zeyu emphasized, “For the future, we need to be cautious. Currently, the Strait of Hormuz remains closed to commercial shipping, with zero oil tankers passing through. Even if the strait reopens, it will take time for Middle Eastern oil supplies to recover. Many oil fields have been damaged by explosions, and key infrastructure has been destroyed. Therefore, short-term oil prices are unlikely to return to pre-conflict levels. Market fluctuations should be watched carefully.”

Shipping data also reveal a harsh reality: according to Goldman Sachs research, faced with the blockade of the strait, the market initially hoped pipelines and alternative ports could compensate. In theory, Saudi Arabia’s east-west pipelines and the UAE’s Habshan-Fujairah pipeline have a combined spare capacity of less than 4 million barrels per day. In practice, redirected flows through pipelines and ports like Yanbu and Fujeirah only increased by about 900,000 barrels per day (0.9 mb/d), far below the theoretical maximum.

According to shipping data analysis firm Kpler, currently, there are no crude oil exports through the Strait of Hormuz, and only sporadic Iranian ships are passing. Oil inventories in the Gulf region have accumulated to 182 million barrels.

“From the news, it seems the airstrikes are cooling down, but it’s still too early to say the conflict is over. Based on current information, it appears Trump doesn’t want to fight anymore, but Iran’s stance still needs close attention. Short-term, there’s still a risk of repeated fluctuations,” said Nanhua Futures analyst.

Nanhua Research Institute Deputy Director Zhou Ji constructed a game analysis framework involving three core parties, projecting three scenarios: first, a verbal ceasefire with no real change—Trump continues to soothe the market, but U.S.-Israel airstrikes and Iran’s counterattacks persist, and the Strait of Hormuz remains closed, causing oil prices to fluctuate between expectations and reality, increasing market volatility. Second, full escalation of conflict—if Israel unilaterally intensifies attacks or Iran long-term blocks the strait, global oil supply could decrease by several million barrels daily, pushing prices above $130. Third, a genuine peace—if the U.S., Israel, and Iran surprisingly reach a ceasefire, and the Strait reopens, prices could plummet below $80, but the likelihood remains low given the current situation.

(Source: Jiemian News)