Crazy 24 hours! Oil prices undergo a "historic-level reversal"
"I believe this war has been very thorough, almost over."
This one remark and expectation from Trump forcibly sent runaway oil prices, which had been surging toward $120, back down to $85.
This is undoubtedly the wildest 24 hours in the crude oil market.
90! 100! 110! Soon 120... On March 9th, oil was still skyrocketing amid headlines about escalating US-Israel-Iran conflicts, stagnation in the Hormuz Strait, and a wave of Middle East production halts. WTI crude oil futures surged up to about 31%, with prices nearing $120 per barrel. The soaring oil prices brought a “bloodbath” to global stocks and bonds, with stock markets plunging and US Treasury yields soaring.
But this scenario was completely torn apart within just 24 hours.
By the Monday US stock market close, US crude futures had only risen 4.3%, closing at $94.77 a barrel.
Later, in after-hours trading, prices further dropped to around $85 a barrel.
This means — Oil prices gave back over $35 in gains within 24 hours.
"In my 30-year career, I've never seen such a market," said one energy fund manager bluntly.
Three major pieces of news pulled the trigger on the market.
Three signals triggered the reversal
First, undoubtedly, was Trump's TACO.
According to Xinhua News Agency, on the afternoon of the 9th, US President Trump hinted during an interview with US media that the US-Iran war could soon be over.
He said that the conflict with Iran had been "very thorough," stating that Iran now "has no navy, no communications facilities, no air force, missiles are almost gone, drones destroyed, including their drone factories," and that "from a military perspective, they've got nothing left."
Trump emphasized that the progress of the war "far exceeded" the original 4–5 week estimate, and dropped a bombshell: The US is temporarily exempting some oil-related sanctions "until the Hormuz Strait returns to normal."
Regarding Iran's new supreme leader Mojtaba Khamenei, Trump said, "I have nothing to say to him," and claimed he already had the "right person" in mind to lead Iran.
Second, yesterday's G7 (Group of Seven) expressed consideration of releasing strategic oil reserves, reversing market expectations.
The G7 leaders held an emergency meeting Monday and said: "We are ready to take all necessary measures, including releasing the strategic petroleum reserves (SPR) to stabilize the market."
The third signal came from Hormuz. There seemed to be signs of transportation recovery at this key strait.
Rumors in the market said some oil tankers had passed through the Hormuz Strait, slightly easing fears of a total disruption in crude oil supply.
Xinhua also reported that Trump said in the interview ships were passing through the Hormuz Strait, though he was still considering "controlling" this vital channel.
These signals directly dampened the frenzy among oil bulls. Funds quickly reversed course, the Nasdaq violently surged 1.4% from heavy loss to positive, and the Dow staged a stunning reversal of over 1,000 points. US small-cap stocks moved from a drop of over 4% to a rise of over 1%.
Almost all assets in the market staged a reversal drama.
US Treasury yields at one point overnight rose by 8 basis points, then sharply fell, and eventually all Treasuries closed up.
Trump's comments reversed the overnight surge; the dollar turned downward.
Gold and Bitcoin began to rebound…
Anxiety, anxiety, anxiety
Why is the US suddenly eager to "cool down" the war? US anxiety is clear for all to see.
First is anxiety about oil prices.
Because of oil prices, obvious differences have emerged between the US and Israel for the first time since the conflict began. According to a CCTV report yesterday, Israeli air force recently attacked about 30 Iranian fuel storage facilities. The US government was extremely dissatisfied, with officials candidly saying this "is not a good idea."
The US logic is clear: destroying civilian energy facilities not only unites Iranian society but directly pushes up global oil prices, which will feed back into US inflation data. The stagflation risk brought by high oil prices is absolutely intolerable for the current White House.
Trump's comments were an ice bath for the feverish oil bulls.
Second is the urgent political clock countdown.
Bank of America Chief Investment Strategist Michael Hartnett pointed out directly in his latest report on March 9: the reality of midterm election pressure will force Trump to cool down the conflict in March.
Data is cold. Hartnett notes that since the conflict broke out, US oil has soared 45% and gasoline prices 15%. Inflation pressures are passing directly to ordinary voters, pressing Trump’s economic approval rating to 40% and his inflation approval down to the low 36%.
“A prolonged conflict is politically unsustainable.” Hartnett believes Trump must reverse the situation before the midterm election. Based on this "cooling" logic, he provided explicit trading guidance: "Sell crude at the $90/barrel level, sell the US dollar when the USD index (DXY) is above 100, and buy 30-year US Treasury bonds at the 5% yield level."
Third is the physical limit of missile stockpiles.
Ballistic missile interceptors needed to defend against Iranian retaliation typically require "two or three per target"; insiders say US, Israel, and other countries’ interceptor stocks may be "at risk of being depleted within days." US military and its allies are "burning through THAAD, Patriot, and SM-3 missile systems faster than they can be replenished."
On March 4th, the anxious Trump even planned to summon military industry giants to the White House to discuss speeding up weapons production.
The market keenly sensed the US's acute fear of oil price feedback. Combined with Trump's latest statement, it was in effect a strong warning to market bulls — the White House is using expectation management to forcibly drag runaway oil prices back to the safety line.
Retail investors trapped: treating crude oil as meme?
And the abrupt shift in news quickly detonated a "chain reaction" within financial markets.
The fact that oil prices can fluctuate $35 up and down in a day is inseparable from the market's extremely fragile microstructure.
First is extreme short squeeze. According to Goldman Sachs, hedge funds’ short positions in US macro products (indices and ETFs) have surged to their highest since September 2022, in the 93rd percentile over the past five years.
When Trump signaled "the war is about to end," massive shorts were forced to buy back to close positions, resulting in a brutal "short squeeze" stampede, forcibly pushing stock indices higher.
Next is the "amplifier" effect of the options market. Bloomberg macro strategist Simon White pointed out that options market makers are now stuck in a "Gamma-negative" trap.
Under the "Gamma-negative" mechanism, when prices fall, market makers must sell to hedge risk; when prices surge sharply, they're forced to chase and buy. This passive "chase the rise/slaughter the fall" action results in extreme, tearing volatility in both directions.
In this professional institutions’ killing field, the frenzied influx of retail investors got completely trapped. Bloomberg ETF expert Eric Balchunas said the US Oil ETF (USO) broke its single-day trading volume record, with retail and high-frequency traders frantically battling within it.
Faced with the huge retail buying in oil ETFs, a Manhattan trading floor trader couldn’t help saying: "Do these idiots think everything is over? ... Are they treating crude oil like a meme stock?"
Cold reality: the crisis isn't over
Financial markets are celebrating "end of war" and G7 reserve releases, but this doesn't untie the physical knot behind the earlier oil price surge.
The real-world crude oil supply chain is still in a substantial “shock” state.
Goldman Sachs’ research reveals the cold reality:
1) We estimate shipments through the Hormuz Strait have dropped 90% from normal levels, reducing global supply by 18 million barrels per day (about 18% of global oil);
2) Of the oil that can theoretically be rerouted by pipeline in the Middle East, only 25% is actually being moved — partly due to real transport disruptions;
3) Currently, there are no quick logistics solutions, and most shipping companies remain on "hold";
4) Compared to historical experiences only focusing on Persian Gulf exports and simple models, oil prices may need to more quickly reach a demand destruction level.
And the shipping shutdown has triggered a fatal chain reaction — "storage squeeze."
Because oil tankers can't get in or out, oil storage tanks along the Persian Gulf are quickly filling. Middle Eastern oil-producing nations have been forced into production cuts.
Kuwait directly declared force majeure, with production cuts expected to expand from 100,000 barrels per day to nearly 300,000. The country's exports rely entirely on the Hormuz Strait, and its storage will be exhausted within days. Abu Dhabi National Oil Company (Adnoc) also announced adjustments to offshore production to meet storage demands.
Saudi Arabia has tried to divert exports to Yanbu Port on the Red Sea, setting a record for supertankers loaded at Yanbu. But Goldman estimates, over the past four days, net diverted volume is only 900,000 barrels per day — nowhere near the 18 million barrel deficit.
As for the G7’s promise to release SPR, it still can’t solve the logistics problem of Middle Eastern oil stuck onshore, unable to be shipped.
Rob Thummel, portfolio manager at energy investment firm Tortoise Capital, pointed out the market’s blind spot: "There's actually plenty of oil in the world. We just need to get it moving."
Petrobras CEO Magda Chambriard bluntly stated:
"Shutdown is quick, but recovery is not."
In this crazy 24 hours, financial markets were trading on White House and G7 “expectation management,” but the industry was still bound by the real "physical supply cut."
Perhaps as long as the Hormuz Strait remains blocked, the alarm in Middle Eastern oil tanks won't be lifted.
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