Crude oil plummeted nearly 20% intraday, with expectations of U.S. support and G7 intervention impacting oil prices, but the supply crisis is far from resolved.

The international crude oil market experienced one of the most volatile sessions on record this week.

After surging about 30% during Monday’s trading, prices sharply reversed, turning lower and briefly falling around 10%. On Tuesday, the decline intensified. During the midday session in the US stock market, US WTI crude briefly fell below $80 to $76.80, with intraday losses expanding to 19%. Brent crude also dipped below $81.20, down about 18%, both far from Monday’s intraday high near $120 per barrel, with the retreat astonishing the market.

The core driver of this sharp decline was a flurry of policy statements. On Monday, Trump hinted that the Iran conflict could “end very soon,” then later expressed willingness to engage in dialogue with Iran, announcing plans to waive some oil-related sanctions and deploy naval forces to escort oil tankers through the Strait of Hormuz.

Meanwhile, the International Energy Agency (IEA) Director Fatih Birol announced a “special meeting” on Tuesday to assess the current oil supply security situation. On the same day, G7 energy ministers met in Paris to discuss coordinating the release of emergency oil reserves. These signals collectively pushed oil prices lower, leading markets to bet that the worst supply shocks might be contained by policy interventions.

By Tuesday’s midday in the US, media reports indicated that the IEA had concluded its meeting without reaching a consensus on releasing strategic reserves.

Some commentary suggests that another factor behind Tuesday’s crude plunge was the US Navy escorting a tanker through the Strait of Hormuz, which the White House somewhat confirmed. According to CCTV News, US Energy Secretary Rick Perry posted on social media that the US Navy successfully escorted a tanker through the Strait to ensure continued global oil flow. The post was soon deleted. Sources say the US Navy has not actually provided escort for any tankers through the Strait.

CCTV reports that Iran’s Islamic Revolutionary Guard Corps Navy Commander responded to the US Energy Secretary’s statement, saying, “The claim that the US military is escorting tankers through the Strait of Hormuz is pure lies. Any action by the US and its allies within missile and drone range of Iran will be blocked.” Later, White House Press Secretary Karine Jean-Pierre confirmed that the US Navy is not currently escorting tankers through the strait, noting that escorting is a option Trump mentioned as a possible response if necessary.

Although increasing signals suggest the US and other G7 nations are preparing to act to suppress rising oil prices, physical supply shocks have not abated.

Since the US and Israel launched military operations against Iran on February 28, shipping through the Strait of Hormuz has nearly halted. Saudi Arabia, Iraq, the UAE, and Kuwait have collectively cut production by up to 6.7 million barrels per day, effectively paralyzing the world’s most critical energy corridor. According to Rapidan Energy, the supply disruptions caused by the Iran conflict are the largest in oil history. Since the start of the year, oil prices have risen over 50%.

Record volatility this week: 30% surge and 10% drop in the same day

This week’s market swings have surpassed historical precedents. On Monday morning in Asia, WTI surged over 30% to nearly $120 per barrel, and Brent rose nearly 29%, both reaching their highest levels since mid-2022. After President Trump suggested the Iran conflict might end “very soon,” prices reversed sharply. By Tuesday’s close, WTI had fallen below $81.20, down more than 10% from last Friday’s close, and Brent dropped below $84, nearly 10% lower.

Market data shows Brent’s intraday high on Monday reached $119.50, with a low of $83.66, marking the largest single-day fluctuation ever. Indicators of oil market volatility approached levels not seen since 2020.

Macquarie’s oil and gas strategist Vikas Dwivedi called Monday “a crazy day,” adding, “Even by the standards of typical wild swings in the oil market, this was unprecedented.” The flow of options market funds is believed to have further amplified the price volatility.

Notably, WTI futures triggered a circuit breaker within two minutes of opening on Tuesday, halting trading briefly—similar to the first trading day after the US-Iran conflict erupted on March 2.

Policy interventions dominate sell-offs: reserve releases and ceasefire signals

The key to the price decline lies in the market’s quick pricing in of policy interventions. On Tuesday, Trump said he was considering waivers for oil sanctions and was open to dialogue with Iran. He also revealed that he discussed escorting tankers through the Strait of Hormuz with Russian President Putin during a call on Monday, though no details were disclosed.

Meanwhile, the IEA announced a special meeting, with member countries holding about 1.2 billion barrels of emergency oil reserves. G7 nations have asked the IEA to prepare scenarios for releasing emergency reserves. According to analysts led by JPMorgan’s US market intelligence head Andrew Tyler, the recent risk asset relief is driven by two signals: a preliminary de-escalation from the White House and discussions among G7 countries about releasing 300 to 400 million barrels of oil reserves.

Deutsche Bank’s global macro research chief Jim Reid said investors will be “closely watching” whether exports from the Strait of Hormuz can resume from the current near halt, especially after Saudi Arabia joined the UAE and Kuwait in further production cuts on Monday. “We’ll also be watching whether plans to release oil reserves can actually be implemented,” he added.

According to Deutsche Bank analysts citing sources, Trump’s options also include suspending federal gasoline taxes and US Treasury intervention in oil futures markets.

Unprecedented supply disruptions: the Strait of Hormuz blockade devastates Middle Eastern oil dynamics

Despite the temporary downward pressure from policy expectations, physical supply shocks remain severe. The Strait of Hormuz is the world’s most vital oil transit route, with about 13 million barrels per day passing through it in 2025, accounting for roughly 31% of global seaborne oil. Since the conflict began, multiple tankers have been attacked, and most shipowners have voluntarily avoided the waterway, causing traffic to dwindle to a trickle.

Saudi Aramco CEO Amin Nasser warned Tuesday that the conflict could have “catastrophic consequences” for the market, stating, “While we have experienced supply disruptions before, this is the biggest crisis faced by the regional oil and gas industry to date.”

Nasser said Aramco is accelerating efforts to reroute oil via the West Coast, with its 7 million barrels per day capacity east-west pipeline expected to reach full operation within days.

Media reports indicate that Saudi oil exports are being diverted through the Red Sea, with at least 25 supertankers heading toward the Saudi Red Sea port of Yanbu. Data from Kpler and tanker tracking compiled by media show that this month, Yanbu’s export volume has surged to about 1.6 million barrels per day, significantly higher than the recent average of 1.1 million barrels per day over the past few months.

Additionally, the UAE’s largest refinery has suspended operations as a precaution after a drone attack nearby.

Rapidan Energy President Bob McNally said the market currently bets this situation won’t last long, but warned not to underestimate the scale of the impact. “For decades, traders have assumed no country would be allowed to blockade the strait. If this actually happens, it’s a ‘catastrophic and completely unexpected’ event,” he said.

Market divergence: optimism and uncertainty coexist

Current oil price movements reflect a tug-of-war between two very different scenarios. Goldman Sachs estimates that if Persian Gulf exports decrease by 15 million barrels per day for 30 days, Brent could fall to $72–76; if the same level of disruption lasts 60 days, prices could stabilize in the $89–93 range—still well above pre-conflict levels.

Deutsche Bank’s head of commodities and FX research, Thu Lan Nguyen, said, “It all depends on how the Iran situation evolves. If the war ends within the next two weeks, I expect oil prices to fall further.”

However, prospects for a ceasefire remain highly uncertain.

Trump also said Tuesday he “won’t back down until the enemy is defeated decisively and completely.” According to Xinhua, US Defense Secretary Lloyd Austin declared Tuesday that the day would be the “highest intensity” day of the military operation, deploying the maximum number of fighters and bombers, targeting Iran with the most precise and high-quality intelligence to date.

Andy Lipow, president of Lipow Oil Associates, expressed caution: “We need to see how Iran responds to President Trump’s statements and whether Iran will attack any oil infrastructure in the coming hours.”

Kenny Zhu, analyst at Global X, noted, “The Iran conflict remains a dynamic evolving event, with no clear signs of ending. When and how the Strait of Hormuz disruption will end remains uncertain.”