Over the past three weeks, the international crude oil market has experienced its most severe geopolitical shock in recent years. Since the US and Israel launched their strikes against Iran, security risks in the Strait of Hormuz have escalated dramatically, causing oil prices to surge by more than 40% at one point. Brent crude oil approached triple digits, and WTI crude oil quickly rose to a high of around $119. As a vital waterway for approximately 20% of global oil and LNG transportation, the Strait's flow has plummeted to near zero (normally 19-20 million barrels per day, now only single digits or even zero on many days), leading to attacks on multiple oil tankers (at least 16-21 confirmed incidents), shipping insurance costs skyrocketing several times over, and some Asian refineries being forced to reduce purchases or reroute routes. The chain reaction of global supply chain disruptions has become fully apparent.



This week, the market saw a significant correction. As of the latest data from March 16-17, WTI crude oil settled in the range of approximately $92-94 per barrel (reaching as low as $91.88 and as high as $99+ on some trading days before falling back), while Brent crude oil settled in the range of $100-101 per barrel (settling around $100.21-100.56), a decline of about 5%-6% from previous highs. This decline is not a signal of risk abating, but rather the result of multiple short-term factors: increased profit-taking pressure from long positions after several weeks of gains; cautious market sentiment and reduced positions ahead of the EIA inventory data release; Trump's statement that "the war will end soon" temporarily lowered risk premiums; expectations of the International Energy Agency (IEA) releasing the largest amount of oil reserves in history—400 million barrels—further suppressed sentiment; and profit-taking after the previous surge also exacerbated the correction. These factors are all short-term and reversible; once geopolitical tensions recur or new attacks occur, funds will quickly return to cover the losses. There has been no substantial improvement in the supply and demand fundamentals of crude oil, and geopolitical risks remain high. The current "stability" is more like a brief respite after a volatile market than a trend reversal.

The Strait of Hormuz is the core factor determining the medium-term oil price trend. Currently, key signals are not optimistic: ship traffic has shrunk dramatically (nearly paralyzed for several days, down 70%-100% from normal levels); multiple oil tankers have been attacked, resulting in crew injuries or abandonment; shipping insurance costs have soared, and some companies have suspended access to the strait; the Iranian Revolutionary Guard maintains a "special state" blockade, and the IRGC continues its operations against merchant ships. Even if the conflict de-escalates quickly, the recovery of maritime shipping will take time—mine clearance, channel safety assessments, and insurance price declines typically take weeks to months. The "psychological repair" of the energy supply chain is far slower than the military action itself. Iran itself is still maintaining some exports (approximately 1.5 million barrels per day flowing to China), while other global flows are almost completely disrupted, further amplifying supply uncertainty. Even if a ceasefire is achieved, the aftereffects will be long-lasting: delayed insurance recovery, difficulty in rebuilding shipowner confidence, and persistent geopolitical premiums.

Trump's "paper tiger" rhetoric starkly contrasts with reality. In his March 16 White House address, he repeatedly claimed that Iran was "basically finished in the first hour," that its air force, navy, and missile systems were "completely destroyed," and that its attack volume had plummeted by 95%, attempting to perpetuate the hardline narrative from the early stages of the war and denigrate Iran as a "paper tiger." He claimed that "Iran has been largely destroyed; its air force is gone, its navy is gone, many ships have sunk, its air defenses have been destroyed, and its leaders are gone," emphasizing that "it wasn't a paper tiger two weeks ago, it is now." However, in the same speech, he devoted considerable time to expressing anxiety about the Hormuz crisis, repeatedly emphasizing the dire situation of blocked shipping lanes, tanker attacks, and soaring costs, his words filled with urgency and helplessness. Even more problematic is his ambiguous understanding of the current Iranian leadership (such as the new Supreme Leader Mojtaba Khamenei), contradicting himself by stating that "no one can declare surrender" yet later claiming that "surrender is imminent."

Iran's proxy network remains active in the Middle East (forces in Iraq, Syria, Yemen, and Lebanon are operational), the Revolutionary Guard maintains a presence in the Straits, and the new leadership has explicitly stated its intention to continue the blockade and counterattack—a stark contrast to the narrative of "complete destruction." From stating "We don't need anyone, we are the most powerful nation" to publicly calling for naval escorts from Britain, Japan, South Korea, and other countries, and even pressuring allies with a "test of loyalty" ("Many countries are on their way, some enthusiastic, some not"), only a limited response from Britain has been received, with others remaining at the "close monitoring" stage. This shift in tone clearly shows that the war's trajectory has deviated from initial expectations, the "quick victory" narrative cannot conceal its passivity, the United States faces a predicament of fighting alone in the Straits security, and Iran's countermeasures capabilities far exceed initial predictions.

Investment bank risk models indicate that the risk of a second upward move in oil prices is far from over. Goldman Sachs' latest scenario assumes that the Strait of Hormuz traffic will remain at 10% of normal levels for 21 days, followed by a gradual recovery over 30 days. They have raised their Q4 2026 Brent price target from $66 to $71 (WTI to $67). If the disruption extends to two months, oil prices could rise to $93, with an extreme scenario approaching $150. The bank expects the average Brent price in March and April to be $98-$100 and has lowered its 2026 US GDP growth forecast by 0.3 percentage points to 2.2%, explicitly attributing it to the oil price shock and inflationary pressures. Morgan Stanley is even more aggressive: a 20 million barrels per day supply disruption will bring "unprecedented" demand suppression, and the risk of short-term oil prices "above $130" remains. They have also postponed the Fed's rate cut path to September-December 2026. Other institutions' consensus range has shifted from $60-65 at the beginning of the year to over $75-90, indicating a repricing of long-term geopolitical premiums in the market.

The biggest misjudgment in the market is equating the "end of the war" with the "elimination of energy risks." The real risk to oil prices is not a one-time surge, but rather repeated shocks and high-level fluctuations; a typical "second wave" could occur at any time—the $110-$130 range is not extreme, and in extreme scenarios, it could even approach the historical high of $150 in 2008. In a geopolitically driven market, political narratives are filled with emotion, and financial markets are ultimately dictated by supply and demand data. The flow of ships in the Hormuz, shipping insurance prices, OPEC+ policies, and US inventories are far more important than any declaration. Investors need to be rational now: strictly control positions, avoid chasing emotions, and diversify hedging (energy stocks + gold + US dollar + defensive sectors). The current pullback is the result of multiple short-term factors and is by no means a signal that risks have completely decreased—the Hormuz threat, Iranian retaliation, and allies' hesitation are still brewing new shocks; excessive optimism could lead to major mistakes.