International crude oil futures experienced a historic plunge on Tuesday, March 10th, with both WTI and Brent benchmark prices falling more than 11% in a single day, marking the largest daily decline since March 2022. The market, influenced by a combination of factors including a rapid shift in expectations regarding Middle East conflict, signals from the U.S. about stabilizing energy supplies, and institutions lowering their price forecasts, plummeted sharply from the four-year highs seen just the previous day, showcasing an extreme reversal from bullish to bearish sentiment.
In New York trading on March 10th, the settlement price for the April WTI crude futures contract was $83.45 per barrel, down $11.32 or 11.9%. The May Brent crude futures contract settled at $87.80 per barrel, down $11.16 or 11.3%. Both major crude benchmarks retreated significantly from their intraday highs above $119 on March 9th. Refined product markets also weakened: May RBOB gasoline futures fell 5.59% to settle at $2.6093 per gallon, while April heating oil futures dropped 6.69% to settle at $3.3466 per gallon.
The immediate trigger for the sharp decline was the U.S. President's statement on March 9th suggesting that action regarding Iran would conclude "soon," coupled with signals from the U.S. administration aimed at stabilizing energy supplies. This rapidly alleviated market fears about a closure of the Strait of Hormuz and supply disruptions. Specifically, the President indicated that while actions would not conclude within the week, they would end relatively quickly, significantly easing concerns about a prolonged conflict. Concurrently, Israel signaled de-escalation, stating it does not seek endless conflict with Iran and would coordinate with the U.S. on the pace of ending hostilities. The market interpreted this as a rapid cooling of Middle East geopolitical risks, leading to a collective unwinding of the supply disruption premium previously priced into oil.
Simultaneously, official U.S. information regarding escorting vessels in the Strait of Hormuz showed inconsistency: a message from the U.S. Energy Secretary about escorting oil tankers was briefly posted and then quickly deleted, after which the White House clarified that no escort operations were being conducted. Iran maintained a firm stance, asserting that vessels from hostile forces have no right to pass through the Strait of Hormuz, creating a dynamic of "verbal confrontation but de-escalating actions." Industry perspectives note that the current market logic is trading on the expectation of "restored navigation in the Strait of Hormuz." Furthermore, the U.S. administration has clear political considerations: lowering oil and gasoline prices to alleviate voter inflation pressure and create a favorable environment for the midterm elections.
The monthly report from the U.S. Energy Information Administration released on March 10th further reinforced expectations for a medium-to-long-term decline in oil prices, contrasting with the short-term conflict-driven highs. The report indicated that, affected by the Iran conflict, Brent prices are expected to remain above $95 per barrel for the next two months, before falling to around $70 per barrel by year-end. U.S. crude oil exports in 2025 are projected to decline by 3% year-on-year, the first annual decrease since 2021. The EIA slightly raised its U.S. crude production estimates for 2026-2027, to 13.61 million barrels per day in 2026 and 13.83 million barrels per day in 2027. It lowered its 2026 global oil production estimate to 107 million barrels per day, while raising the 2027 estimate to 109.6 million barrels per day, suggesting an overall looser supply outlook.
Despite the cooling conflict expectations, institutions widely caution that the oil supply chain cannot quickly recover immediately after a ceasefire. Restoring wells to full capacity after shutdowns can take weeks or longer, limiting short-term supply elasticity. Meanwhile, Iran continues to exert pressure, warning that if U.S. and Israeli attacks persist, it will not allow a single drop of oil to be exported from the region. Under pressure, the U.S. has begun utilizing policy tools to curb prices, with the President considering easing sanctions on Russian oil and potentially releasing strategic petroleum reserves. However, G7 energy ministers have so far failed to reach agreement on a coordinated release, deferring the decision to the International Energy Agency for assessment before further action. Future policy moves warrant close attention.
On the inventory front, data provides some temporary support. According to the American Petroleum Institute, for the week ending March 3rd, U.S. crude inventories fell by 1.68 million barrels, gasoline stocks dropped by 1.84 million barrels, and distillate inventories decreased by 2.26 million barrels. While showing draws, these declines were smaller than market expectations across the board. Subsequent official EIA inventory data will be key to watch.
The current oil price crash results from the combined effect of three factors: a reversal in geopolitical risk expectations, policy interventions aimed at stabilization, and a medium-to-long-term outlook for loose supply and demand. In the short term, oil prices will continue to experience high volatility, driven by developments in the Middle East conflict, navigation conditions in the Strait of Hormuz, and potential reserve release actions by the U.S. and IEA. In the medium to long term, prices are expected to revert to being influenced by U.S. production increases, OPEC+ policy, and global demand trends, with a downward correction from current highs remaining the prevailing view among institutions. According to an oil analyst, short-term prices are likely to fluctuate within a high range of $85-$95 per barrel. Barring renewed geopolitical flare-ups causing sharp swings, the probability of another surge above $110 is considered low. Looking further ahead, if the conflict gradually de-escalates and shipping normalizes, the geopolitical premium is expected to steadily erode. Combined with increasing U.S. production and a generally ample global supply, the center of gravity for oil prices is likely to shift downward to the $70-$80 per barrel range, returning to being primarily driven by fundamental supply and demand dynamics.
