Oil prices plummeted. What happened?

Overnight, a barrage of headlines about "US-Iran contacts" and "Hormuz Strait navigation" pushed WTI crude oil from above $102 down to below $94. How did this happen? According to media reports: - During the daytime on Monday (corresponding to the US overnight session): Oil prices opened higher due to chaos triggered by an attack on Iran’s key energy hub, Kharg Island. But as expectations emerged that "shipping through the Strait of Hormuz may ease," the rally quickly disappeared and even turned into a decline. - Monday afternoon to evening (corresponding to European trading hours): Reports showed that Iran's foreign minister commented that the US has "learned a lesson," raising hopes for a possible "off-ramp" strategy. Oil prices extended their losses. - Monday night (corresponding to US pre-market hours): US Treasury Secretary Bassente assured all efforts were underway to support transit through the Strait of Hormuz. He added that some vessels had already passed through with US acquiescence, sending oil prices lower. - Today at 00:30 (US Eastern Time 12:30): Trump publicly stated, "Iran wants to negotiate," and oil prices gave up their intraday gains. - Today at 01:10: Trump again said, "the Strait of Hormuz will soon resume navigation," and oil prices accelerated their decline. - Today at 02:20: Reports surfaced that Israel believes Iran is seeking to reach an agreement quickly, and rumors spread of recent text exchanges between the Iranian foreign minister and the US envoy. Oil prices hit an intraday low. - Today at 03:30: US media reported "recent direct US-Iran contacts," sending oil prices plunging. - Today at 03:50: US media followed up, reporting "Trump receives options to end the Iran war daily," with oil prices falling decisively below $94. The market seems increasingly convinced that signs of easing US-Iran tensions have emerged. Oil prices moved overnight with the news, and US stocks rose as oil prices dropped. White House "Off-ramp" Market pricing over the "off-ramp strategy" is not unfounded. Soaring US domestic pump prices have just hit their largest historical surge, with momentum unabated. This direct inflation and livelihood pressure may be prompting the Trump administration to seek an exit from the conflict. According to CCTV News on March 17, multiple sources revealed that, while planning military operations for the Iran conflict, the US military has prepared multiple "off-ramp options" for President Trump, allowing him to end the conflict when needed. These "exit channels" have been incorporated into daily war planning. White House press secretary Levitt said the US government initially estimated that achieving military objectives would take about 4-6 weeks. She said the military is carrying out operations, which will end when the President judges that targets are met and the Iranian threat is removed. CCTV News noted that some government advisers urge developing an exit strategy, fearing the war may destabilize the global economy, while others believe they should take the opportunity to weaken Iran's regional influence. NBC confirmed such internal divisions. Trump’s White House adviser and AI & crypto chief David Sacks publicly called: "I agree we should work hard to find an exit strategy. Now is the time to declare victory and leave, which is clearly also what the market hopes to see." At the same time, it was reported that Trump, due to war, wishes to remain in Washington and has asked to postpone relevant diplomatic meetings for "about a month". Iran: US and Israel "have learned a lesson," but do not seek a ceasefire Echoing Trump’s position, Iran stated that ending the war depends on ensuring no further "aggression," and reiterated that it has not requested a ceasefire. According to Xinhua News Agency in Tehran, March 16, Iran's Foreign Minister Araqchi stated the US and Israel's war against Iran must end in a way that guarantees no more "aggression," and said US and Israel "have learned a lesson," realizing they confront a country determined to defend itself and ready to fight on. Araqchi made these remarks at the weekly Ministry of Foreign Affairs briefing. He said: "We say we do not seek a ceasefire, not because we want to continue the war, but because this time, the war must end in a way that ensures the enemy will never dare to attack or invade again." Araqchi said US and Israel have mobilized all forces to compel Iran's "unconditional surrender," but Iran is conducting "glorious" resistance and will continue without wavering. He reiterated that Iran has not requested a ceasefire. After more than two weeks of conflict, US and Israel have begun seeking help from other countries to ensure navigation safety in the Strait of Hormuz. Iran’s stance: The Strait of Hormuz is closed only for “enemies and their allies, and those who unjustly invade our country.” Iran swiftly denies recent US contacts Regarding hyped US-Iran contact rumors, Iran's Foreign Minister Abbas Araqchi quickly denied them on social platforms. The media learned Araqchi stated on social media: "My last contact with Mr. Witkov was before his boss ordered another illegal military strike against Iran, killing diplomatic efforts." Araqchi sharply exposed the motivation behind false news: "Any assertion otherwise seems only intended to mislead oil traders and the public." Previously, semi-official Tasnim news agency cited a knowledgeable Iranian source denying recent US contacts, stating such reports are pure fiction and baseless. "Escort Alliance" encounters cold response The one-sided optimism priced in by markets also encountered setbacks with the "Escort Alliance". US efforts to resolve oil supply disruptions by multilateral means have stalled. Xinhua reports that Trump publicly complained some countries are "unenthusiastic" about assisting the US in securing the Strait of Hormuz for navigation. Trump named some of these countries as long-term US aid and protection recipients, and complained: "Although we protect them, once we ourselves are in trouble and need help, they never step forward for us." The EU’s High Representative for Foreign Affairs and Security Policy, Karas, confirmed this isolation, saying: "This is not Europe's war." She stated EU members have no intention to expand their existing "shield" naval escort mission to the Strait of Hormuz. On the same day, German Chancellor Merz stated Germany would not participate in military actions to protect tankers in the Strait of Hormuz, and the Iran conflict is not a NATO issue. Asset pricing "chaos and confusion," ceasefire probability stuck at 50% Goldman Sachs trader Bobby Molavi summed up the current market: "The past few weeks, the market has been a strange mix—combining calm, panic, pain, hope, fear, more panic, more pain, and some confusion." Capital is losing its anchor. "Fundamentals are fiercely competing with themes and narratives," Molavi pointed out, and the asset management industry, rarely, must cope with regime transitions, geopolitical volatility, and technological disruption amid violently changing cross-asset correlations and volatility. "Geopolitical and macro factors’ impact on economic and micro levels is more significant than ever. Fundamentals and various themes and narratives are competing." "Oil price drop = US stocks rise" became the only overnight logic. As oil prices fell, inflation fears eased and US Treasury yields declined. All three major US indices ended up about 1%. But this was not based on fundamental optimism. Golman Sachs trading desk showed activity was extremely low that day. The US stock rally was mainly driven by short covering and sales of doomsday put options (0-DTE), not substantive capital inflows. Safe-haven assets also showed divergence. The dollar weakened, gold retreated to near $5,000; Bitcoin was aggressively bought, breaking $74,000 and hitting a fresh high since early February. Options and prediction markets currently imply only a 50% chance of a ceasefire within two months. Sign of Strait reopening? Currently, reports indicate that the Strait of Hormuz is starting to resume navigation. Data show that, since March 11, no attacks on oil tankers in the Hormuz area have been detected. Meanwhile, the head of EOS Risk Group consulting reports at least four vessels left the Strait of Hormuz in the past 24 hours after brief detours through Larak-Qeshm Strait. However, physically, the Strait of Hormuz—carrying 20% of the world’s oil supply—remains fraught with danger. NBC reports that, after more than a dozen merchant vessels were attacked by drones, the strait is effectively closed to tanker traffic. The conflict has spilled over to Middle East energy infrastructure: US and Israel bombed Iran’s oil export hub Kharg Island; Saudi Arabia, Dubai, and Kuwait reported drone attacks; a key oil export terminal in Oman was evacuated after a tanker attack; Iraq paused its oil terminal operations; the UAE’s Fujairah oil port suffered consecutive drone strikes. Faced with requests to escort merchant vessels, US Joint Chiefs Chairman General Dan Caine bluntly said, escorting tankers through the strait is "still too complex" at present. More firmly, Iran's new Supreme Leader Mojtaba Khamenei stated in his first public speech: the strait should remain closed. JP Morgan warns that the strait shutdown and subsequent production/refining stoppages mean the real pain of commodity shortages and inflation spikes has not yet fully emerged. Capital is blindly chasing headlines in low-liquidity trading and could be hit at any moment by geopolitical reality. Risk Disclaimer The market carries risks. Invest with caution. This article does not constitute personal investment advice, nor does it take into account any individual user's particular investment objectives, financial condition, or needs. Users should consider whether any views, opinions, or conclusions in this article suit their particular circumstances. Investments made accordingly are at your own risk.