Oil Prices Plunge After U.S.-Iran Tensions Ease
Oil prices plunge after President Trump's Jan. 31 remarks eased U.S.-Iran tensions, sending Brent and WTI lower and refocusing traders on fundamentals.
KEY TAKEAWAYS
- Trump's Jan. 31 remarks eased U.S.-Iran tensions, triggering a rapid unwind of the geopolitical risk premium.
- Brent and WTI fell over 5.0%, the steepest single-day decline in more than six months.
- OPEC+'s March production pause and surplus forecasts refocused pricing sensitivity on fundamentals.
HIGH POTENTIAL TRADES SENT DIRECTLY TO YOUR INBOX
Add your email to receive our free daily newsletter. No spam, unsubscribe anytime.
Oil prices plunged on Feb. 2, 2026, after President Trump said Iran was seriously talking with Washington. The remarks triggered a rapid unwinding of the geopolitical risk premium, sending Brent and WTI sharply lower following OPEC+'s reaffirmed March production pause on Feb. 1.
Sharp Price Decline
At 02:35 GMT on Feb. 2, Brent crude for April delivery traded at $67.09 a barrel and WTI March futures at $63.02 a barrel. By 7:09 a.m. ET, the benchmarks had fallen to $65.99 and $61.92, respectively. Overall, oil benchmarks dropped more than 5%, marking the steepest single-day decline in over six months.
The selloff accelerated after the weekend’s diplomatic signals. Prices fell about 3% in early Asian trade on Feb. 1 and slid further during the U.S. session before the larger retreat recorded the following morning.
Geopolitical and Supply Factors
The decline reversed a late-January rally when futures reached multi-month highs amid heightened concern over potential disruptions through the Strait of Hormuz. On Feb. 1, OPEC+ confirmed a pause on planned March production increases, extending a decision from November 2025 amid roughly a 20% drop in crude prices over the past year.
Analysts noted the global oil market is expected to be in surplus for 2026. Iran produced about 4.7 million barrels a day in 2025, roughly 4.4% of global supply. The Strait of Hormuz remains critical, carrying about one-fifth of global oil and liquefied natural gas flows, keeping it a focal point for market sentiment.
Market research highlighted the fragility of that sentiment despite the diplomatic thaw. Some analysts emphasized ongoing risks around the Strait of Hormuz, while others pointed to a broader financial-market correction and a concurrent rout in metals as additional pressures on crude prices.
The easing of tensions removed part of the geopolitical premium supporting recent gains, shifting near-term pricing sensitivity toward demand signals, macroeconomic factors, and commodity market spillovers rather than immediate supply shocks.
