Crude oil plunged nearly 20% intraday, as expectations of US escorting and G7 intervention hit oil prices, but the supply crisis is far from resolved.

Crude oil plunged nearly 20% intraday, as expectations of US escorting and G7 intervention hit oil prices, but the supply crisis is far from resolved.

```

The international crude oil market has experienced one of the most volatile weeks on record.

After surging about 30% intraday on Monday, prices sharply reversed, turning negative and at one point dropping around 10%. On Tuesday, the decline widened further. During the US stock market midday session, US WTI crude fell below the $80 mark to under $76.80, with intraday losses expanding to 19%. Brent crude once dropped below $81.20, falling about 18% for the day, both far removed from the intraday highs near $120/barrel on Monday. The pullback stunned the market.

The core driver of this plunge was a wave of policy statements. On Monday, Trump suggested the Iran war might "end soon," later saying he was willing to talk with Iran, announcing plans to exempt some oil-related sanctions and dispatching the Navy to escort oil tankers through the Strait of Hormuz.

At the same time, International Energy Agency (IEA) director Birol announced a “special meeting” on Tuesday, to assess oil supply security. That same day, the G7 energy ministers met in Paris to discuss coordination on releasing emergency oil reserves. These signals jointly pressed oil prices lower, leading the market to bet that the worst supply shock may be curbed by policy intervention.

By Tuesday midday in US trading, media reported that the IEA ended its meeting without reaching a coordinated decision to release strategic oil reserves.

Commentators said another force behind Tuesday’s crude plunge was that the US Navy escorted a tanker through the Strait of Hormuz, something the White House “in some measure confirmed.” According to CCTV News, US Energy Secretary Wright posted on social media that the US Navy had successfully escorted a tanker through the Strait of Hormuz to ensure continued oil flow to global markets. The post was deleted shortly thereafter. Sources said the US Navy has not yet provided tanker escort in the Strait of Hormuz.

CCTV mentioned that the Iranian Revolutionary Guard Navy commander responded to the US energy secretary's statement: "The claim that the US military escorted a tanker through the Strait of Hormuz is a pure lie. Any action by the US and its allies will be stopped within the range of Iran's missiles and drones." White House press secretary Levitt later confirmed the US Navy has not yet escorted tankers in the Strait, noting that escorting is an option Trump mentioned if necessary.

Although more signals show the US and other G7 nations are preparing measures to suppress surging oil prices, the shock to physical supply has not dissipated.

Since February 28, when the US and Israel launched military action against Iran, tanker traffic through the Strait of Hormuz has nearly ground to a halt, and Saudi Arabia, Iraq, UAE, and Kuwait have collectively cut output by up to 6.7 million barrels/day. The world's most important energy artery is effectively paralyzed. According to Rapidan Energy analysis, the supply disruption triggered by the Iran war is the largest in oil history. So far this year, oil prices are still up over 50% cumulatively.

Record volatility on Monday: 30% surge and 10% drop in a single day

This week’s oil market volatility has surpassed historical precedents. Early Monday in Asia, WTI crude surged over 30% to nearly $120/barrel, Brent crude was up almost 29%, both hitting their highest levels since mid-2022. After President Trump told the media the Iran war might "end soon," oil prices reversed rapidly. By Tuesday’s US market close, WTI fell below $81.20, down over 10% from last Friday’s close; Brent fell below $84, down nearly 10%.

Market data shows Brent crude hit an intraday high of $119.50 and low of $83.66 on Monday, the largest daily swing on record. Volatility indicators for oil markets approached the highest levels since 2020 that day.

Macquarie oil & gas strategist Vikas Dwivedi described Monday as a "crazy day," saying "even by the crude market's usual wild volatility standards, this was unprecedented." Option market flows are believed to have further amplified price swings.

Notably, WTI futures triggered a circuit breaker within two minutes of opening on Tuesday, halting trading briefly — the same happened on March 2, the first trading day after the US-Iran conflict erupted.

Policy intervention expectations drive selloff: Reserve release and ceasefire signals

The key to pushing oil prices down was the market’s rapid pricing of policy intervention. On Tuesday, Trump told the media he is considering waiving oil-related sanctions and is willing to talk with Iran. He also revealed that in a Monday call with President Putin, he discussed plans for tanker escorts through the Strait of Hormuz, but did not disclose specifics.

Meanwhile, the IEA announced a special meeting, reportedly with member states holding a combined 1.2 billion barrels of emergency oil reserves. G7 countries have asked the IEA to prepare scenarios for releasing emergency reserves. According to a team led by Morgan Stanley US market intelligence head Andrew Tyler, current risk asset breathing room comes from two clues: a preliminary de-escalation signal from the White House and G7 discussions to release 300-400 million barrels of oil reserves to the market.

Jim Reid, global macroeconomic research & thematic strategy head at Deutsche Bank, said investors will "closely monitor" whether exports via the Strait of Hormuz recover from near suspension, especially as Saudi Arabia joined UAE and Kuwait in further output cuts on Monday. "We’ll also watch if the reserve release plans actually materialize," he added.

Deutsche Bank analysts cited that Trump's options also include suspending the federal gasoline tax and Treasury intervention in crude futures markets.

Unprecedented supply disruption: Hormuz blockade reshapes Middle East oil landscape

Despite policy expectations temporarily suppressing prices, physical supply shocks remain severe. The Strait of Hormuz is the world’s most important oil transit route. According to Kpler data, about 13 million barrels/day are transported through it in 2025, accounting for about 31% of the world’s seaborne oil. Since the outbreak of war, several tankers have been attacked, and most owners have proactively avoided the route, drastically reducing traffic to a trickle.

Saudi Aramco CEO Amin Nasser warned Tuesday the war will have "catastrophic consequences" for the market, saying "although we’ve experienced supply disruptions in the past, this is the biggest crisis the region’s oil and gas industry has ever faced."

Nasser said Aramco is accelerating the use of west coast routes for oil transshipment, and its east-west pipeline's daily 7 million barrel capacity "should run at full load in a few days."

Media said Saudi oil exports are rerouting to the Red Sea, with at least 25 VLCCs heading to Saudi’s Red Sea port Yanbu. Kpler data and media tanker tracking aggregations show Yanbu’s terminal exports have jumped to about 1.6 million barrels/day so far this month, well above the recent average of 1.1 million barrels/day.

Meanwhile, UAE’s largest refinery has suspended operations as a precaution following a nearby drone attack.

Rapidan Energy president Bob McNally says markets are currently betting this situation won’t last long, but warns not to underestimate its scale. He said: “For decades, traders have assumed no country would be allowed to blockade the Strait. Seeing it really happen is ‘totally catastrophic and completely unexpected.’”

Market divergence: optimism and uncertainty coexist

Current oil price trends reflect a tug-of-war between two very different scenarios. Goldman Sachs estimates that if Persian Gulf exports fall by 15 million barrels/day for 30 days, Brent could drop to $72-$76/barrel; if a similar disruption continues for 60 days, prices might stabilize at $89-$93/barrel — still well above pre-war levels.

Thu Lan Nguyen, head of commodities and FX research at Deutsche Bank, said: "Everything depends on how the Iran situation unfolds. If the war ends within two weeks, I expect oil prices to fall further."

However, ceasefire prospects remain highly uncertain.

On Tuesday, Trump also said he "won’t stop until the enemy is completely, decisively defeated." According to Xinhua, US Defense Secretary Hegseth said at a Pentagon briefing Tuesday that the day would be the "highest intensity" strike day in the operation, deploying the largest number of fighters and bombers for attacks on Iranian targets backed by "more precise and higher-quality intelligence than ever."

Andy Lipow, president of Lipow Oil Associates, takes a cautious view: “We need to observe how Iran responds to President Trump’s comments, and whether Iran will attack any oil infrastructure in the next few hours.”

Kenny Zhu, Global X research analyst, pointed out, "The Iran conflict remains a dynamically evolving event, with no clear sign of ending yet." When, and how, the Hormuz Strait disruption ends remains unresolved.

Risk Disclosure and Disclaimer ClauseThe market carries risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their circumstances. Invest accordingly, and responsibility is your own. ```