Oil prices experienced a sudden sharp decline on Monday evening, dropping $17 within five minutes and stunning investors. The sell-off was triggered by a statement from the U.S. President, who unilaterally expressed a willingness to abandon threats of striking Iranian power plants. He described dialogue with Iran as very positive and productive, announcing a five-day delay to military action. This announcement caused an immediate and severe drop in oil prices.
However, the Iranian Foreign Ministry later responded, stating that the President's comments were aimed at lowering energy prices and buying time for military preparations. While there are initiatives to de-escalate tensions, Iran emphasized that calls for easing the situation should be directed at the United States, as Iran did not start the war. Iranian Foreign Ministry spokesperson Bagheri stated on the 23rd that Iran had received messages from friendly countries regarding U.S. requests for negotiations to end the war and had responded appropriately based on its principles, adding that no talks had been held with the U.S. Iran's stance on the Strait of Hormuz and its conditions for ending the conflict remain unchanged. Reports from U.S. and Israeli media claimed that Washington was engaging in dialogue with Iranian Parliament Speaker Ghalebaf, but this was denied by Ghalebaf himself. Iranian media suggested that the U.S. was spreading false news about negotiations to assassinate Ghalebaf and create internal divisions in Iran. Further information from Iranian sources indicated that messages had been exchanged indirectly through Egypt and Turkey, but the U.S. had not accepted core conditions including compensation for damages and acknowledgment of aggression against Iran. The U.S. had reportedly requested a meeting with Ghalebaf on Saturday.
Overall, indirect contact between the U.S. and Iran appears to have occurred, but Washington has not accepted the central conditions set by Tehran. The so-called positive negotiation developments on Monday evening were likely a staged effort by the U.S. President to cool the market, and possibly to buy time for further military moves, as some forces deployed to the Middle East are not yet in position. Regardless, the move caught the market off guard, with participants concerned that the President, known for his business background, might have compromised under significant pressure. Previously, market expectations for a near-term ceasefire were almost zero due to the wide gap in positions between the two sides. While the situation remains uncertain, the President's goal of cooling the market has been achieved, at least temporarily, by sowing doubt among participants. However, the cost is substantial: if he is later proven to have lied, both his personal credibility and that of the United States would suffer severely. While short-term cooling of oil prices may have been achieved, it could come at the expense of long-term credibility.
Currently, both sides continue to engage in mutual attacks. The performance of the Middle Eastern market in the coming days will be critical. If the Strait of Hormuz does not resume normal navigation in the next few days, the situation could become more complicated. According to the latest data from Kpler, total oil production cuts in the Middle East have already exceeded 10 million barrels per day, with further reductions expected by the end of March, meaning upward pressure on oil prices will persist. Alternatively, if the President's move is indeed a tactical deception, as suggested by the Iranian Foreign Ministry, to buy time for military plans, any escalation in conflict would similarly lead to another rise in oil prices.
The President's remarks have undoubtedly created market confusion. If he has indeed conceded under pressure, oil prices may have peaked and could fluctuate downward toward $80 or lower. However, the most likely scenario is that his comments were a smokescreen. Despite repeated denials from Iran, oil prices fell significantly in response to the President's ongoing statements. He even remarked with some satisfaction that the U.S. had destroyed much of Iran's infrastructure, making it difficult for Iran to obtain information. This event once again highlights the power of controlling media narratives. Key factors to watch include whether the Strait of Hormuz gradually reopens and whether Middle Eastern oil supply disruptions are resolved in the coming trading sessions. Chasing the sell-off is not recommended at this time, as oil prices lack a foundation for a sustained sharp decline. Prices are expected to remain highly volatile at elevated levels. Market participants should pay attention to timing and exercise caution.
Daily Market Movements: WTI crude futures fell $10.1, or 10.28%, settling at $88.13 per barrel. Brent crude futures dropped $10.49, or 9.86%, to $95.92 per barrel. INE crude futures declined 7.81%, closing at 742.2 yuan.
The U.S. dollar index fell 0.36% to 99.15. The Hong Kong Exchange USD/CNY rate rose 0.22% to 6.8707. The U.S. 10-year Treasury yield increased 0.25% to 110.81. The Dow Jones Industrial Average gained 1.38%, closing at 46,208.47.
Recent Developments: The U.S. President claimed on March 23 that the U.S. had "very strong" and "perfect" dialogue with Iran, with key agreement points formed, and expressed optimism about ending the conflict if progress continues. Iran repeatedly denied any talks with the U.S. The President responded by stating that the U.S. had destroyed much Iranian infrastructure, making it difficult for Iran to obtain information. He asserted that the U.S. was communicating with a highly respected Iranian leader, though not Supreme Leader Khamenei, and claimed Iran initiated contact due to concerns about power plant attacks. When asked about future control of oil, he suggested joint control with the "next Iranian Supreme Leader." Reports of talks with Iranian Parliament Speaker Ghalebaf were denied by Ghalebaf, with Iranian media alleging the U.S. spread false news to facilitate assassination attempts and create internal divisions.
Israeli media reported that U.S. officials informed Israel and other nations that Washington may have "no choice" but to launch a ground operation to seize Iran's Kharg Island. The report cited sources stating the U.S. is accelerating the deployment of thousands of Marines and naval personnel to the Middle East, including amphibious assault ships and transport vessels carrying approximately 4,500 personnel. The U.S. President previously threatened strikes on Kharg Island and further action against Iranian oil infrastructure. Iranian military sources warned that any U.S. military aggression against Kharg Island would trigger an unprecedented response. Kharg Island, located in the Persian Gulf, is Iran's largest crude export terminal, handling 90% of its oil exports.
Rising gasoline prices are impacting U.S. households, with a recent poll showing 55% of respondents stating price increases have affected their finances, 21% significantly. Since the U.S.-Israel strike on Iran on February 28, the average U.S. gasoline price has surged nearly $1 per gallon. About 87% of Americans expect further price increases, and most anticipate large-scale ground operations in Iran, though support for such actions is limited. Soaring living costs are a top issue for midterm elections, with 63% disapproving of the President's handling of cost-of-living issues. His economic approval rating stands at 35%, down from earlier in his term.
The International Energy Agency (IEA) stated that the energy crisis triggered by the Iran conflict is more severe than the 1970s oil crises and post-Ukraine price spikes combined. The current crisis represents the cumulative impact of two oil crises and a gas market collapse, posing a major threat to the global economy. IEA Executive Director Fatih Birol noted that over 40 energy assets across nine Middle Eastern countries have been severely damaged, potentially prolonging global supply chain disruptions. He emphasized that disruptions extend beyond oil and gas to critical economic sectors like petrochemicals, fertilizers, sulfur, and helium trade, which could have serious consequences for the global economy.
