Even by the volatile standards of the global oil market, Monday's extreme price swings tested the limits of traders. Following a series of negative developments over the weekend related to the escalating crisis in the Middle East, the benchmark contract for oil, the world's most traded commodity, surged by as much as 29%.
As Gulf oil producers secured output and maritime traffic through the Strait of Hormuz nearly ground to a halt with no resolution in sight, the Brent crude contract saw massive volume in the first few hours of trading. It soared to a peak near $120 per barrel, reaching its highest level since mid-2022. Then, market sentiment abruptly reversed, forcing traders into dramatic shifts.
Both of the most actively traded oil contracts turned negative by the close of trading on Monday.
"I enjoy the volatility, but it's exhausting," said Toby Copson, a portfolio manager at Davenport Energy, which trades oil and gas. "Everyone is fully engaged. Few of us are getting any sleep. Essentially, we understand the drivers, but we are being stress-tested by headlines and social media posts."
Initial gains during the early session cooled after the G7 paved the way for a coordinated release of strategic petroleum reserves. This was followed by comments from former President Trump suggesting the conflict could end soon. Even though details were scarce, this shift in tone rapidly cooled the market. For Brent crude, this resulted in its largest intraday drop from peak to settlement, reminiscent of volatility seen during the COVID-19 pandemic.
While traders typically thrive on volatility, swings as severe as those on Monday are relatively rare. The dramatic shifts in headlines and the sharp price movements this week have unsettled even seasoned market participants, evoking memories of the commodity price surge following the Russia-Ukraine conflict in 2022 and, before that, the historic day in 2020 when WTI crude futures briefly traded below zero.
"This is pure panic trading," said Nick Twidale of AT Global Markets, a 27-year market veteran who was at his desk in Sydney by 6 a.m. on Monday. "My phone was ringing every ten seconds—ding, ding, ding—from traders, clients, and industry insiders, all asking the same question: 'What on earth is happening with the oil price?'"
The Middle East crisis erupted late last month when U.S. and Israeli forces began strikes against Iran. Tehran responded with defiance, attacking military bases and infrastructure in the region, creating chaos throughout the Persian Gulf. Heading into Monday's trading session, concerns were mounting about how long the war, which is already impacting the global economy, would last.
"When geopolitical decisions drive price action, investors feel a loss of control," said Stefano Grasso, a former oil and LNG trader and now a senior portfolio manager at Singapore's 8VantEdge Pte. "The market is experiencing not just volatility, but also a sense of helplessness."
The price swings in Brent crude pushed volatility indicators to record levels.
Beyond oil, Monday's turbulence swept across other commodities, from base and precious metals to food, as traders tried to digest the existing chaos and potential future disruptions. Among these moves, aluminum prices surged to their highest since 2022, silver plunged nearly 6%, and gold was dragged lower by a stronger U.S. dollar.
The natural gas market was also thrown into turmoil. As oil prices spiked, LNG buyers in Asia—particularly in emerging markets—began to panic, fearing a global scramble for supplies. Disruptions at Qatar's largest LNG export facility, caused by the conflict, persisted with no clear end in sight.
According to traders, India's GAIL failed to secure a cargo for March in an LNG procurement tender on Monday, noting that no spot gas was available for that month at all. Traders added that buyers in Thailand were attempting to secure short-term supplies from Malaysia and other regional suppliers.
"The best response is discipline: maintain appropriately sized positions and focus on risk management, not prediction," said Grasso of 8VantEdge. "The market is trying to price in political decisions that can change overnight. This naturally triggers violent swings."
The oil price surge continued into Tuesday, with U.S.-listed crude prices triggering a circuit breaker within the first two minutes of trading. After the open, WTI crude fell by as much as 11%, though it remained above its pre-conflict levels.
"Is the worst over? Perhaps," said Twidale. "This is a trade driven by one headline after another; it's incredibly tough."