Oil Traders Defy Geopolitical Chaos: Brent Crude Plummets Amid Israel-Iran War Escalation
Markets just shrugged off World War III vibes—crude tanks despite Middle East powder keg.
War? What war? Traders treated escalating Israel-Iran conflict like a bad Netflix reboot, sending Brent crude into freefall. The ultimate 'sell the news' play.
Funny how oil speculators suddenly develop risk appetite when there's blood in the sand—but try getting them to HODL through a 2% Fed rate hike.
Traders used open-source clues to stay ahead of the market
Since the war between Israel and Iran started, oil traders have been glued to Twitter and open-source intelligence. One executive at a major trading firm said, “Everyone is in a similar boat, we are all tracking Twitter feeds, Osint accounts and everything you can to make sense of it.”
Analysts pored over satellite pictures of Al Udeid air base in Qatar. The base, home to 10,000 U.S. troops, looked empty days before Iran’s response. That tipped traders off, as this was more symbolic than serious.
That’s why traders didn’t buy into a crisis. They knew oil infrastructure wasn’t going to be touched. And Iran, according to Rystad Energy, had actually been pumping out more crude during the fighting because it couldn’t refine enough at home. That meant oil was still moving, no disruption. And when oil flows, panic dies fast.
Last week said it all. When Israel hit Iranian gas and fuel sites, prices jumped 5.5%. But once it looked like Tehran wanted peace, the bump vanished. The market had one obsession: whether Iran WOULD attack tankers in the Strait of Hormuz, the 33-kilometer-wide passage that moves Gulf oil to global buyers.
Traders hit sell fast, expecting no real oil shortage
The pattern’s been obvious for years. Geopolitical drama creates price spikes. But if there’s no real threat, traders sell immediately. One oil exec said, “This is not a situation like Ukraine and Russia where we have to reorient trade flows for a long time. This is a situation where the market is looking to sell any spike.”
Montepeque doubled down on that idea, saying, “If you read the market right, you have the position in your favour, you are making money and you want to crystallise the gain and sell.”
Even before this conflict, nobody trusted that oil would hold up. The Opec+ cartel raised output. American shale drillers flooded the market. Supply wasn’t a problem. Demand was soft. Helima Croft, a strategist at RBC, said the WHITE House didn’t even tap into the Strategic Petroleum Reserve because they believed “they had other sources of spare barrels in the event there was a serious outage.”
When Donald Trump, now back in the White House, helped broker a ceasefire between Iran and Israel, Brent fell another 6.1% on Tuesday, landing just above $67. That’s lower than pre-war levels.
There’s another thing dragging prices: derivatives. Before fighting began, oil producers bought put options, you know, contracts that pay out if prices fall. To hedge, dealers started selling futures. As Brent dropped on Monday, those puts got closer to hitting. That triggered even more selling, and is what has brought us to right now, when prices are well below their level from a week before all of this even started.
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