Global oil prices tumbled more than 3% Thursday as geopolitical anxieties over potential U.S.-Iran military conflict eased following comments from President Donald Trump, while mounting evidence of oversupply added further downward pressure on markets.
Brent crude, the international benchmark, dropped $2.19 to settle at $64.33 per barrel by mid-morning European trading, marking a 3.3% decline. Its American counterpart, West Texas Intermediate, fell in lockstep, shedding $2.07—or 3.34%—to trade at $59.95 per barrel as of 0845 GMT.
The sharp reversal comes just a day after Brent futures briefly climbed above $66.50 per barrel on Wednesday, buoyed by fears that escalating tensions between Washington and Tehran could disrupt oil flows through the strategically vital Persian Gulf. Those gains evaporated rapidly after Trump’s remarks shifted market sentiment.
The catalyst for Thursday’s selloff was President Trump’s announcement that he had received assurances that Iranian security forces had ceased their deadly crackdown on anti-government demonstrators. The statement significantly reduced expectations of imminent U.S. military action against the Islamic Republic, which had been rattling energy markets for days.
“Trump turned the oil market mood by saying he had received assurances that killings of demonstrators in Iran had stopped,” said John Evans, analyst at brokerage PVM. Evans noted that Thursday’s price action reflects traders repositioning around “the narrative of a near-term future of oversupply” rather than supply disruptions.
The geopolitical temperature appeared to cool further when a U.S. official confirmed Wednesday that Washington was withdrawing some personnel from military installations across the Middle East. The move followed warnings from a senior Iranian official that Tehran had informed neighboring countries it would strike American bases if the United States launched attacks on Iranian soil.
Beyond the fading geopolitical premium, fundamental market factors are painting an increasingly bearish picture for crude prices.
U.S. inventory data released Wednesday by the Energy Information Administration showed crude and gasoline stockpiles grew more than analysts had anticipated last week, signaling weaker-than-expected domestic demand and adding to global oversupply concerns.
Contributing to the supply glut, Venezuela has begun reversing production cuts implemented during the period of U.S. sanctions, according to three sources familiar with the matter. The South American nation, which possesses the world’s largest proven oil reserves, is also resuming crude exports—adding barrels to an already well-supplied market.
Market participants received mixed signals on the demand outlook this week. The Organization of the Petroleum Exporting Countries projected Wednesday that global oil consumption would grow at roughly the same rate in 2027 as in 2025, with data suggesting supply and demand would reach near equilibrium in 2026.
That relatively optimistic assessment stands in stark contrast to forecasts from other major energy agencies, which have warned of a substantial supply surplus in the coming years as production growth—particularly from non-OPEC countries—outpaces demand increases.
Meanwhile, fresh data from China offered a bright spot for demand prospects. Chinese customs figures released this week showed crude oil imports surged 17% year-over-year in December, while total 2025 imports rose 4.4%. Daily import volumes hit record highs both for December and for the full year 2025, underscoring the world’s second-largest economy’s persistent appetite for crude despite concerns about its economic growth trajectory.
With geopolitical risk premiums draining from crude prices and supply indicators pointing toward oversupply, oil markets face a challenging outlook in the near term. Traders will be watching closely for any resumption of tensions in the Middle East, further inventory builds in major consuming nations, and whether OPEC and its allies adjust production policies in response to weakening prices.
The rapid $2-plus swing in both major crude benchmarks Thursday demonstrates the market’s continued sensitivity to headline risk, even as underlying fundamentals increasingly favor buyers over sellers.
WHAT YOU SHOULD KNOW
Oil prices plummeted over 3% Thursday as geopolitical fears eased following President Trump’s announcement that Iranian crackdowns on protesters had stopped, significantly reducing the threat of U.S. military action in the region. However, the decline was not solely driven by de-escalation—fundamental market pressures played an equally important role. U.S. crude inventories rose more than expected, Venezuela resumed production and exports, and analysts increasingly warn of global oversupply ahead.
While China’s record-high import volumes in December offered a demand bright spot, the overall market narrative has shifted from supply disruption concerns to oversupply anxieties.
Traders are no longer pricing in a geopolitical risk premium, and with multiple sources adding barrels to an already well-supplied market, crude faces continued downward pressure unless OPEC intervenes or demand unexpectedly accelerates.
