After a 16% Rally, Oil Gets a Reality Check at the Start of the Week
Oil prices plunged nearly 5% on Monday (February 2) and headed for their deepest daily decline in more than six months. The trigger: Donald Trump's statement that Iran was "serious about talking" with Washington—a signal of de-escalation that immediately reduced the geopolitical risk premium in the oil market.
At around 05:28 GMT, Brent fell $3.38 (-4.9%) to $65.94/barrel, while WTI fell $3.33 (-5.1%) to $61.88/barrel. This movement reversed an earlier rally that had been fueled by concerns about a potential conflict with OPEC members.
Trump's comments over the weekend—which also downplayed the threat of a "regional war" from the Iranian Supreme Leader—led the market to view the risk of a military strike on Iran as less urgent than previously priced in. Once that risk subsided, oil's already high price point became vulnerable to a quick "release."
Some analysts believe this decline is more like a repositioning than a major fundamental shift. The logic is simple: there was no new "supply shock," so the market returned some of the risk premium it had built up during fears of Middle Eastern supply disruptions.
Pressure also came from a broader commodity sell-off, after gold and silver experienced sharp corrections—a situation exacerbated by the strengthening of the US dollar. When the dollar strengthens and volatility increases, market participants tend to reduce risk across assets, including energy.
On the supply side, OPEC+ also decided to hold production steady for March, extending the pause in supply increases that had previously been "frozen" for January–March 2026 due to weaker seasonal consumption. With tensions over Iran slightly easing and supply not tightening, the market is refocusing on the old story: oil remains vulnerable to a correction if the geopolitical risk premium continues to erode.
Source: Newsmaker.id
