The Crude Oil Game: Why did Brent crash from $120 to $90 in a day and what should investors watch next? Explained

Crude Oil Price Today: Global crude oil prices saw extreme volatility after Brent briefly surged to around USD 120 per barrel on Monday before falling sharply to nearly USD 90, as fears over supply disruptions eased and geopolitical signals shifted market sentiment.

Market expert Anil Singhvi said the sharp movement in crude oil prices was largely driven by news flow, speculative trading and short-covering rather than fundamental changes in global demand and supply.

Why did crude oil surge to USD 120?

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According to Singhvi, crude oil was trading near USD 82–85 levels at the end of last week. However, prices began rising sharply late Friday amid escalating tensions in the Middle East.

One of the biggest concerns was that Iran could disrupt global oil shipments through the Strait of Hormuz, a key global energy corridor through which a significant portion of the world’s crude oil supply passes.

Any threat to shipping through the Strait of Hormuz often triggers panic buying in global oil markets.

Brent touches USD 120 on Monday

On Monday morning, Brent crude opened sharply higher and continued to rally through the session, briefly touching around USD 120 per barrel. The surge was driven by fears that Iran could block or restrict oil shipments through the Strait of Hormuz amid the ongoing conflict involving the United States, Israel and Iran.

However, the rally did not sustain, and prices later corrected sharply.

Rally driven by short covering

Singhvi said the spike was not entirely supported by fundamentals. "Crude oil's rally was not driven by fundamental demand-supply changes. A large part of the move came from short covering and trading positions," he said.

He explained that traders holding short positions were forced to exit their trades as prices surged, triggering a sharp upward spiral.

"As prices move higher, short sellers begin cutting their positions due to mark-to-market losses and margin calls. This creates a spiral effect where more short covering pushes prices even higher," Singhvi said.

G7 discussion triggers sharp fall

The rally began reversing after reports suggested that the Group of Seven countries were considering releasing oil from their strategic reserves if supply disruptions intensified. The possibility of additional supply entering the market eased panic in oil markets and triggered heavy selling. Following the reports, crude oil prices dropped sharply from the USD 120 levels.

Trump remarks weaken crude

Later, additional statements further pressured oil prices. Remarks from Donald Trump suggesting that the conflict with Iran could end soon helped ease fears of prolonged supply disruptions.

Trump also indicated that the United States was taking steps to ensure that oil and gas shipments through the Strait of Hormuz continue without disruption.

After these developments, Brent crude slipped sharply and is currently trading around USD 90 per barrel. "A USD 30 fall in crude oil within a day is extremely large for any asset class," Singhvi said.

Volatility may continue

Despite the correction, Singhvi said volatility in crude oil prices may persist. He noted that Iran has continued to warn about possible disruptions in the Strait of Hormuz, which means geopolitical risks remain elevated.

"The risk has not disappeared. Iran has not yet clearly indicated that tensions are easing. So volatility in crude oil is likely to remain," Singhvi said.

Market participants are also closely watching the outcome of discussions among finance ministers from the Group of Seven countries regarding the use of emergency oil reserves.

Long-term investment risky

Meanwhile, commodity market expert Ajay Suresh Kedia of Kedia Advisory said the recent rally in crude oil has largely been sentiment-driven.

“The recent rally in crude oil prices is primarily fueled by geopolitical fears rather than a meaningful increase in global consumption. Disruptions and concerns around the Strait of Hormuz, which carries nearly 20 per cent of global oil shipments, have triggered panic buying in the market,” Kedia said.

He added that crude oil prices historically struggle to sustain levels above USD 100 per barrel for long periods. “History shows that crude oil rarely holds above the USD 100 mark for long. In 2008, Brent crude surged to about USD 148 per barrel, while in 2022 it touched nearly USD 138, but both rallies were followed by sharp corrections,” he said.

Kedia said prices could still move toward USD 135–USD 138 if geopolitical tensions escalate further. However, he added that prices may gradually correct once the situation stabilises and supply improves.

“As tensions ease and production increases, the market could start seeing some correction. OPEC+ is expected to increase production from April, which could add supply to the market,” he said.

According to Kedia, crude oil prices may initially decline toward USD 82–USD 84 and eventually stabilise around USD 75–USD 76 in the coming months if geopolitical risks moderate.