Oil prices crash 16% on US-Iran diplomacy hopes, but Middle East attacks keep market nervous
Brent crude tumbled toward $97 per barrel Monday, extending the steepest weekly drop since April 2020 after losing over 16% last week. West Texas Intermediate traded around $91. The plunge follows hopes that a Democratic sweep in US midterm elections could ease US-Iran tensions and reduce supply disruption fears from the Persian Gulf.
But conflicting signals from Washington create uncertainty. Secretary of State Marco Rubio dismissed Iran's demands as "outrageous and ridiculous," while President Trump called further military strikes "highly unlikely" if talks progress. Meanwhile, a tanker was hit in the Strait of Hormuz over the weekend, and Houthi rebels damaged Saudi Aramco offices in Riyadh, triggering Saudi retaliation.
Despite attacks, Persian Gulf exports have recovered to near pre-war levels. OPEC output rose to 88% of February volumes, though Iranian production dropped under US naval blockade. Commonwealth Bank analyst Vivek Dhar says lifting the blockade could push Brent to $70-85. Ukraine also struck a sixth Russian refinery in a week as Russia prepares for US-mediated talks in Abu Dhabi Tuesday.
For Nigeria, lower oil prices mean reduced government revenue at a time the 2026 budget likely benchmarks above $75/barrel. The N820.7 billion hit to NGX industrial firms from rising energy costs (reported separately) shows how volatile energy markets squeeze the real economy. Cheaper crude could eventually ease petrol import costs, but only if the naira stabilizes and supply chains adjust.
With EIA, OPEC, and IEA reports due this week, will you position your portfolio for sustained low prices or hedge against the geopolitical risk premium that could snap Brent back above $100?