West Texas Intermediate (WTI) Oil prices fell sharply on Monday, dropping about $5 from session highs to lows near $101.00 per barrel, after reaching $106.44 earlier in the day. The decline was triggered by reports that the US and Iran may be moving closer to a peace deal, facilitated by international intermediaries, which could lead to a 45-day ceasefire and the reopening of the Strait of Hormuz. This development prompted a moderate risk appetite in the market, resulting in lower oil prices [1].
Prior to the ceasefire news, US President Donald Trump had threatened to destroy Iran’s bridges and energy sites if the Strait of Hormuz was not reopened by Tuesday, 8 PM Eastern time (00:00 GMT). This threat raised concerns about potential Iranian retaliation against US industries in the Middle East and contributed to a boost in oil prices during the early Asian session [1].
Since Tehran closed the Strait of Hormuz—a critical passage for about one-fifth of global oil supply—crude prices have surged approximately 50%, pushing the global economy to the brink of collapse [1]. Over the weekend, OPEC and its allies agreed to raise their output quotas by 206,000 barrels per day in May. However, the market reaction to this announcement was muted, as the ongoing closure of Hormuz and damage to Gulf oilfields have cast doubt on the feasibility of achieving the increased output [1].
Overall, the combination of geopolitical developments and OPEC's production decision has created volatility in the oil market, with prices responding to both the threat of conflict and the potential for peace [1].
CONCLUSION
WTI Oil prices have experienced significant volatility due to shifting geopolitical dynamics between the US and Iran, as well as OPEC's output decisions. The market is reacting to both the possibility of a ceasefire and the challenges posed by disrupted supply routes, resulting in a medium impact on oil prices. Forward-looking sentiment remains cautious as traders await further developments regarding the reopening of the Strait of Hormuz and OPEC's ability to meet its new quotas.