Oil Prices Tumble 4% as Geopolitical Tensions Ease Following Trump's Iran Remarks
Global crude oil markets witnessed a significant downturn on Monday, with prices sliding approximately 4% following comments from U.S. President Donald Trump regarding diplomatic engagement with Iran. The remarks, made over the weekend, helped alleviate fears of an immediate military escalation involving the key OPEC member nation, prompting a sharp reversal from recent multi-month highs.
Market Reaction and Price Movements
Brent crude futures experienced a substantial decline of $2.81, representing a 4.1% drop, to settle at $66.51 per barrel. Simultaneously, U.S. West Texas Intermediate (WTI) crude fell by $2.70, also marking a 4.1% decrease, to reach $62.51 per barrel. This downward movement represented a notable pullback from the previous trading session, during which Brent had reached a six-month peak and WTI had approached its strongest level since late September.
Factors Driving the Price Correction
The primary catalyst for Monday's price decline emerged from President Trump's statement on Saturday, where he indicated that Iran was "engaged in serious talks" with Washington. This comment came shortly after Tehran's top security official, Ali Larijani, confirmed that preparations for negotiations were underway. The diplomatic overtures were further reinforced by reports suggesting that Iran's Revolutionary Guards' naval forces had no immediate plans to conduct live-fire drills in the strategically vital Strait of Hormuz.
Adding to the bearish sentiment, the Organization of the Petroleum Exporting Countries (OPEC) decided during its Sunday meeting to maintain current oil production levels for March. This decision followed the group's earlier move in November to pause additional planned output increases scheduled for January through March 2026, citing seasonally softer demand patterns.
Additional Market Pressures
Further downward pressure on crude prices materialized following President Trump's nomination of Kevin Warsh as the next Federal Reserve Chairman. This development strengthened the U.S. dollar and boosted bond yields, creating additional headwinds for dollar-denominated commodities like oil.
Rahul Kalantri, Vice President of Commodities at Mehta Equities, commented on the market dynamics: "Crude oil prices remained highly volatile and slipped from their highs on Friday after Kevin Warsh was nominated as the next Fed Chairman. The nomination boosted the U.S. dollar and bond yields, which weighed on oil prices. Weak sentiment and selling pressure in global markets also dragged crude lower. Still, supply worries linked to U.S.-Iran tensions and severe winter weather in the U.S. may support crude prices on dips."
Technical Outlook and Market Analysis
Kalantri provided specific technical levels for the current trading session, noting that crude oil finds support at $62.55-$61.00 with resistance positioned at $64.40-$65.10. In Indian rupee terms, he identified support at ₹5,860-₹5,710 and resistance at ₹6,080-₹6,165.
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, offered additional perspective: "Crude oil prices on MCX have corrected from around ₹6,100 to ₹5,700, as risk-off sentiment grips global financial markets. The move has been reinforced by a firmer US dollar and reports that any immediate US attack on Iran has been delayed."
Banerjee further elaborated on the near-term outlook: "For the near term, we expect MCX crude oil to trade in a broad consolidation range of ₹5,600–₹5,900, as markets balance macro risk-off forces against lingering geopolitical uncertainty."
Disclaimer: This analysis is for educational purposes only. The views and recommendations expressed above belong to individual analysts or broking companies and do not represent Mint. Investors are advised to consult with certified experts before making any investment decisions.
