Oil prices fell sharply on Monday after Washington and Iran showed clear signs of a possible diplomatic detente. Statements by former U.S. President Donald Trump about Iran’s willingness to engage in negotiations directly impacted the markets, triggering a 5% drop in the futures of Brent and WTI.
Oil prices react to declining geopolitical risk
As Oil Price’s website comments, Trump stated. that Iran “is talking seriously” with the United States, referring to preparations for ain reference to preparations for a possible dialogue on security and nuclear agreements. This turn in relations has deflated the risk of a military conflict in the Persian Gulf. Persian Gulfone of the main reasons that had driven crude oil prices in previous weeks.
Analysts agree that this drop reflects a partial elimination of the geopolitical premium. The absence of a military escalation has defused the tensions that kept crude oil prices high, especially after previous threats of US intervention.
Dollar and market fundamentals also have an influence
In addition to the political détente, the dollar strengthened, which tends to make crude oil more expensive for international buyers. This factor contributed to the drop in prices, in a context where supply interruptions from countries such as Kazakhstan or the United States are also dissipating.
OPEC+ announced that it will production level for March, a sign of stability on the supply side.a sign of stability on the supply side. However, analysts warn that, in fundamental terms, the oil market continues to face downward pressure from the risk of supply outstripping global demand in the coming months.
The market reacts to a new equilibrium
Brent crude oil fell to 65.86 dollars and WTI fell to 61.79 dollars, levels that contrast with the previous month’s increases.61.79, levels that contrast with the previous month’s rises. In January, both references had gained more than 13% thanks to the rebound in geopolitical risk, which is now being diluted.
Commodity markets also showed parallel declines in metals such as gold and silver. gold and silverreflecting a generalized adjustment in the appetite for safe-haven assets. With tensions weakening and the dollar strengthening, investors are reevaluating their positions.
The evolution of the diplomatic conflict between Washington and Tehran will be key in the coming days to define whether oil finds a new low or resumes its upward path in the face of any turn in the negotiations.
Source: Reuters
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