Selloff picks up steam
WTI crude dropped 3.6% on Monday to $95.10 a barrel, its lowest close in nearly two weeks. Brent crude slipped 1.5% to $101.60. Both benchmarks extended losses that began last week when President Trump told CBS the Iran campaign was "very complete, pretty much".
The move marked a sharp reversal from March 9, when WTI briefly touched $119 after Iran shut the Strait of Hormuz to tanker traffic. Since that spike, the U.S. benchmark has shed roughly $24 a barrel.
What is driving the drop
Three forces are pulling prices lower at once.
First, Washington keeps signaling the shooting is almost over. Trump told reporters at a Florida press conference that the strikes were "just an excursion into something that had to be done" and that the military was "getting very close to finishing." Markets read that as a timeline for reopening the strait.
Second, the supply response has been massive. The IEA coordinated the largest emergency stockpile release in its 50-year history - 400 million barrels from more than 30 nations, with the U.S. contributing 172 million barrels from the Strategic Petroleum Reserve. Saudi Arabia also quietly ramped output to 10.88 million barrels a day in February, up 640,000 barrels from January, the biggest monthly jump since June.
Third, the demand picture is softening. The IEA cut its 2026 global oil demand growth forecast by 210,000 barrels a day to just 640,000, citing the drag from elevated prices and a weakening economic outlook.
Wall Street cheered
Cheaper crude gave equities a lift. The S&P 500 rose 1.2%, its best session in five weeks. The Dow Jones Industrial Average added 513 points. Airlines, cruise lines, and other fuel-heavy sectors led the gains.
For stock investors, the logic is straightforward: lower oil means lower input costs and less pressure on consumer spending.
Risk has not disappeared
Traders betting on a swift return to pre-war prices may be getting ahead of themselves. The Strait of Hormuz remains closed. Tanker traffic through the waterway has fallen to less than 10% of normal levels, and Iran's new supreme leader has vowed to keep it shut.
The U.S. Navy is still drawing up plans for Operation Epic Escort, a convoy system to push tankers through the strait, but senior officials say the fleet will not be ready for weeks. Until ships actually start moving, roughly 20 million barrels a day of crude and refined products stay bottled up.
Analysts at JPMorgan estimate that 4 million barrels a day of production cuts may be needed within days if the blockade drags on. The IEA's own forecast sees Brent holding above $95 for the next two months before falling below $80 in the third quarter - but only if the strait reopens.
What to watch
The next catalyst is any concrete signal on Hormuz. A ceasefire deal, a successful Navy convoy, or even partial reopening could send prices sharply lower. On the other hand, an Iranian threat to oil infrastructure on Kharg Island - something Tehran has hinted at - would erase the recent selloff overnight.
For now, the geopolitical risk premium that pushed oil from $70 to $119 in less than two weeks is leaking out. How much further it deflates depends on whether Trump's optimism translates into tankers moving through the strait.