Oil prices fell after rising for five days straight, with ICE Brent dropping 4.15%. This decline happened after the US chose not to act immediately against Iran during ongoing protests. There were worries about potential US military action, which could block oil shipments through the Strait of Hormuz, where about 20 million barrels per day are transported. While some risks have eased, concerns remain, potentially shaking up the market in the short term.

Market Observations

Analysts noted that the ICE Brent timespread showed strength even with falling prices. This resilience is likely due to decreased oil flows from Kazakhstan’s CPC terminal, indicating tightness in the spot market. The FXStreet Insights Team gathers key market observations from experts and adds its own analysis. The article covers currency performance, including GBP/USD and USD/CAD, along with changes in gold markets. It also features promotional content for financial newsletters and ads for top brokers in 2026. Legal disclaimers clarify that the opinions expressed belong to the authors and do not necessarily reflect FXStreet’s views.

Oil Market Dynamics

After five days of rising prices, oil has finally dipped, with Brent crude dropping over 4% to around $81 a barrel. The decline began when the White House indicated it prefers diplomatic solutions instead of immediate military action amid tensions with Iran. This shift has lowered the geopolitical risk premium that had been factored into oil prices. As fears of an immediate conflict fade, the market’s focus is returning to bearish fundamentals. The U.S. is producing oil at a strong rate of 13.3 million barrels per day, close to record levels. The International Energy Agency also reported that global demand growth will slow to just 1.1 million barrels per day by 2026 due to economic challenges in Europe and China. This pattern is familiar to traders. A similar situation unfolded in the fall of 2025, when tensions in the Persian Gulf briefly pushed prices up, only for weak economic data to pull them down. The lesson here is that geopolitical risk premiums often don’t last long unless followed by real action, allowing supply and demand dynamics to take charge. Looking ahead, selling into strength may be a wise approach. One could consider selling call spreads on March or April Brent futures contracts to capitalize on a steady or declining market. Still, some tightness persists in the physical market, which might keep the front-month contract firm. Caution is essential, and any outright short positions should be managed carefully to respond to sudden supply issues. While the immediate threat has eased, the situation remains uncertain, and there’s a significant risk of missteps. Approximately 21 million barrels of oil flow daily through the Strait of Hormuz, making up about 20% of global consumption. Therefore, holding inexpensive out-of-the-money call options could be a smart way to protect against a sudden escalation that might cause prices to spike. Create your live VT Markets account and start trading now.

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