Oil prices have undergone a dramatic reversal. Driven by strong expectations of easing geopolitical tensions in the Middle East, the global crude oil market, after experiencing a sharp surge last week and early this week, began a steep decline.
On March 10, WTI crude oil futures opened with a crash of over 10%, hitting an intraday low of $84 per barrel. As of the latest update, WTI prices were hovering around $90 per barrel. Just the previous day, on March 9, both WTI and Brent crude futures had surpassed $119 per barrel. However, overnight, WTI crude futures plummeted sharply, touching an intraday low of $81.19 per barrel and closing at $85 per barrel, marking a drop of nearly 28% from the day's peak.
Domestic futures markets followed the downturn. SC crude oil futures and containerized freight (European route) futures, which had hit limit-up gains recently, saw intraday declines exceeding 16% and 19% respectively on March 10.
On the macroeconomic front, reports indicated that on March 9, a statement suggested a swift conclusion to potential strikes. On the same day, the Group of Seven (G7) urgently stated its readiness to intervene in the market, intensifying the contest between energy supply concerns and geopolitical risks.
An energy and chemicals analyst commented that the market's focus remains squarely on the Middle East situation. The sharp overnight correction in crude oil was influenced by statements regarding conflict resolution and developments affecting oil tanker passage through the Strait of Hormuz. However, after multiple limit-up moves, profit-taking by long positions or any macroeconomic news can cause significant volatility. Short-term attention in the oil market remains on navigation conditions in the Strait of Hormuz, the negative feedback from depleting producer inventories, and the stances of the involved nations.
The recent disruption to the Strait of Hormuz, a critical global energy channel due to Middle East conflicts, had plunged the market into deep anxiety over an oil supply crisis. This led to a week of surging crude oil and shipping prices, which also drove broad gains in the chemical sector. During this period, WTI crude futures accumulated a surge of 35%, while Brent crude futures rose over 27%, briefly touching $119.50 per barrel—a new high since 2022.
With clear signals of de-escalation emerging, speculative funds began retreating, rapidly diluting the geopolitical risk premium.
Facing the uncontrolled rise in oil prices, the G7 issued a statement on March 9 indicating member readiness to take necessary measures, including potentially releasing reserves, to support global energy supply. On the same day, a US energy official stated that the administration was discussing a coordinated release of strategic petroleum reserves to address the current market situation.
The reversal from nearing historic peaks to entering a technical bear market occurred in less than 24 hours. However, industry observers expect lingering effects from the conflict, noting that restoring normal shipping traffic through the Strait of Hormuz will take time. Reports suggested that even if hostilities ceased immediately, it could take weeks to months for LNG production and energy exports from the region to return to normal levels.
Analysis from one futures company noted that bullish and bearish factors are intensely intertwined. The geopolitical conflict premium is rapidly unwinding, but structural risks persist. Potential threats to key shipping routes continue to support freight costs, with rising Europe route rates reflecting ongoing supply chain concerns.
Behind these extreme price swings, debate continues between focusing on geopolitical risks versus underlying supply and demand fundamentals. In fact, early in this conflict cycle, multiple international investment banks and energy research institutions repeatedly emphasized that while short-term sentiment might push prices higher, the fundamental macro picture of ample global crude supply had not changed, and geopolitical support for oil prices is inherently fragile.
At the beginning of the year, three major energy agencies forecast a supply surplus for 2026. The IEA projected a surplus of 4 million barrels per day (bpd), the EIA projected 2.07 million bpd, and OPEC was relatively more optimistic, still forecasting a surplus of 1.1 million bpd for 2026.
Another analysis suggested that geopolitical-related supply disruptions have begun to appear, which might marginally alleviate surplus pressure and create opportunities to reassess supply risk premiums. It was posited that the recent escalation could further widen supply risk exposure. Unlike previous situations that eased surplus pressure, a direct impact on production and exports could potentially bring an early end to the global oil surplus格局.
Another perspective argued that the Strait of Hormuz involves the interests of multiple nations, making a swift resolution to tensions unlikely. However, precisely because of these multi-national interests, the probability of a prolonged, widespread disruption keeping oil prices consistently above $100 per barrel is also not high. A more likely scenario is that shipping through the strait does not fully return to previous norms, requiring the global oil price to incorporate a persistent "friction premium." The key long-term impact to watch is the effect of a higher oil price floor on the global economy.
The violent fluctuations in oil prices have also transmitted to other major asset classes.
In equity markets, risk appetite has seen a rapid recovery. US stock indices rallied late in the session, with the Nasdaq gaining 1.38%, nearly recouping losses since the conflict began. In Chinese markets, the major indices were up at midday on March 10. Technology stocks rebounded, led by computing hardware sectors, while oil and gas stocks experienced broad declines.
Analysis indicated that the Middle East conflict altered the global recovery trade narrative that had prevailed since the start of the year. The oil price surge reshaped the global liquidity theme, affecting the repricing of almost all assets. Initially, capital markets priced in a避险 mode. As uncertainty grew around Strait of Hormuz disruptions, this gradually shifted towards pricing in a stagflation scenario.
Futures analysts pointed out that after the conflict erupted, the market's core logic shifted towards concerns about rising inflation and economic stagnation, rapidly升温避险 sentiment and pressuring global risk assets. However, compared to international markets, Chinese equities showed greater resilience and lower negative impact. Easing tensions and falling oil prices are also conducive to repairing risk appetite in these markets.
A statistical report covering 12 significant international conflicts since 2000 noted that in the initial phase (the first week), global equity assets were typically dragged down in the short term, while the US dollar and commodities performed relatively better.
The gold market witnessed a rare instance of "safe-haven failure." As oil prices fell sharply and避险 sentiment cooled rapidly, gold prices came under pressure, with COMEX gold futures once dropping to $5,021 per ounce before rebounding to $5,182 per ounce. A market participant analyzed that in this round, gold's financial attributes are outweighing its commodity attributes—high oil prices raised concerns about further interest rate hikes, and rising rates are a significant headwind for gold. This rare correlation, where oil and gold moved in tandem, highlights the complexity of current market pricing logic.
In foreign exchange markets, Asian currencies found a temporary respite. Strategists noted that the retreat in energy prices from highs significantly alleviated imported inflation pressures for Asian economies, providing a rebound opportunity for previously impacted Asian currencies. A softer US dollar has revived carry trades in emerging markets, but markets remain tense. However, they cautioned that as shipping safety in the Strait of Hormuz is not yet fully restored, forex markets will remain highly sensitive until clearer signals of de-escalation emerge.
The same statistical report further analyzed that, over a longer horizon, the impact of international conflicts on major asset classes is actually limited. Looking from one week to one month after an event, equity assets often experience a recovery. For example, the median gain for the S&P 500 in such intervals was 1.4%, with an 83% probability of上涨. Emerging market equities also mostly rebounded. Conversely, the US dollar and commodities, which performed well initially, often began to weaken, with probabilities of上涨 at 33% and 42% respectively during these later periods.