Oil prices perform an epic "roller coaster" with a 28% intraday plunge — how does it affect the stock market, gold, and forex

Oil prices reversed overnight.

Driven by strong expectations of easing geopolitical tensions in the Middle East, the global crude oil market experienced a sharp surge last week and early this week, followed by a “crash-like” plunge.

On March 10, WTI crude oil futures opened with a drop of over 10%, briefly hitting an intraday low of $84 per barrel. As of press time, WTI futures hovered around $90 per barrel. On March 9, both WTI and Brent crude futures broke through $119 per barrel. Overnight, WTI futures plummeted, with a low of $81.19 per barrel during trading, closing at $85, nearly 28% below the intraday high.

The domestic energy chemical sector followed the decline, with the previously “one-word limit-up” SC crude oil futures and shipping (European route) futures falling more than 16% and 19% respectively during March 10 trading.

On the macro front, according to CCTV News, on March 9, U.S. President Trump stated that strikes on Iran would end soon. The same day, the G7 countries issued an emergency statement indicating readiness to intervene in the market, marking a heated phase in the game over energy supply and geopolitical risks.

Nanhua Futures energy and chemical analyst Ling Chuanhui told Yicai that the current market focus remains on the Middle East situation. Overnight, crude oil prices retreated sharply amid Trump’s war-ending remarks and the impact of tanker traffic through the Strait of Hormuz. However, after multiple limit-up sessions, funds taking profits on long positions or macro news can cause significant market fluctuations. In the short term, attention remains on the Strait of Hormuz navigation, the depletion of oil-producing countries’ inventories, and the attitudes of Iran and the U.S.

“Oil Valve” Crisis Temporarily Resolved, Geopolitical Premium Disappears Instantly

Recently, due to Middle East geopolitical conflicts, the Strait of Hormuz—a critical global energy corridor—was disrupted.

The market once fell into deep anxiety over an “oil valve” crisis, with crude oil and shipping prices soaring for a week, driving the chemical sector higher across the board. During this period, WTI crude futures surged by 35%, and Brent crude by over 27%, reaching a high of $119.50 per barrel, a new high since 2022.

As the U.S. signaled clear easing, speculative funds began to withdraw, instantly diluting the geopolitical premium.

In response to the previous runaway oil prices, the G7 issued a statement on March 9, saying all parties are prepared to take necessary measures, including releasing reserves, to support global energy supply.

The same day, U.S. Energy Secretary Jennifer Granholm said the U.S. government is “discussing” coordinated releases of strategic petroleum reserves to address current market conditions.

The reversal from near-record highs to a technical bear market took less than 24 hours. However, industry insiders expect the impact of the conflict will have “aftershocks,” and the resumption of shipping through the Strait of Hormuz will take time.

According to CCTV News, on March 6, Qatar’s State Minister for Energy Saad Al-Kaabi stated that Qatar has halted liquefied natural gas production. Even if the conflict ends immediately, it will take weeks to months for Qatar to return to normal supply levels. He also predicted that all energy-exporting countries in the Gulf could cease oil and gas production within weeks.

Shenwan Hongyuan Futures analysts noted that the current market is seeing intense tug-of-war between bullish and bearish factors. The geopolitical risk premium is rapidly unwinding, but structural risks remain. The conflict continues to threaten key shipping routes, supporting higher shipping costs, with rising freight rates on European routes confirming supply chain concerns.

Supply and Demand, Geopolitical Games, and Industry Warnings of Volatility

Behind this extreme surge and plunge, debates over geopolitical risks and fundamental supply-demand factors persist.

In fact, at the onset of this conflict, many international investment banks and energy research institutions repeatedly emphasized that, despite short-term sentiment boosting oil prices, the macro fundamentals of sufficient global oil supply had not changed. Geopolitical support for oil prices remains inherently fragile.

Earlier this year, three major energy agencies forecast a supply surplus of crude oil by 2026.

The IEA projected a surplus of 4 million barrels per day; EIA forecasted a surplus of 2.07 million barrels per day; OPEC was more optimistic, expecting a surplus of 1.1 million barrels per day in 2026, with quarterly surpluses of 90, 140, 120, and 110 thousand barrels per day respectively.

CICC’s research report noted that geopolitical-related supply disruptions have begun to appear, which may marginally ease excess supply pressures and offer revaluation opportunities for oil risk premiums. The agency believes that the escalation of U.S.-Iran tensions could further increase supply risk exposure, potentially ending the global oil surplus earlier than expected if Iran’s oil production and exports face direct impacts.

CITIC Construction Investment argued that the Strait of Hormuz involves multiple national interests, making it unlikely that the U.S.-Iran conflict will end at any time soon. However, because the strait involves many countries, sustained large-scale disruptions are unlikely to keep oil prices above $100 per barrel indefinitely. A more probable scenario is that shipping through the Strait of Hormuz will not return to previous levels, and global oil prices will carry a “friction premium.” The key concern is the long-term impact of rising oil price levels on the global economy.

Impact on Other Asset Classes

The sharp volatility in oil prices has also transmitted to other major asset classes.

In equities, risk appetite has quickly recovered. U.S. major indices rallied late Monday, with the Nasdaq up 1.38%, nearly recouping losses since the conflict began.

In China’s A-shares, on March 10, the three major indices all closed higher at midday, with technology stocks leading the rebound and computing hardware leading gains, while oil and gas stocks broadly retreated.

CITIC Construction Investment noted that the Middle East conflict has shifted the global recovery trade since early this year. The surge in oil prices has reshaped the main theme of global liquidity, affecting nearly all asset re-pricing. As the U.S.-Iran conflict unfolded, markets initially adopted a risk-averse stance, but with the uncertainty over Strait of Hormuz disruptions, the mode gradually shifted toward stagflation.

Chuangyuan Futures analysts pointed out that after the outbreak of the Middle East conflict, market logic shifted toward concerns over rising inflation and stagflation, with risk aversion intensifying and putting pressure on global risk assets. However, compared to external markets, Chinese A-shares showed more resilience and were less affected. Easing conflict and falling oil prices are also beneficial for risk appetite recovery in A-shares.

Guoxin Securities’ report noted that during initial phases of regional conflicts, equities tend to be dragged down while the dollar and commodities perform relatively better. Since 2000, there have been 12 typical regional conflicts, and within a week, global equities generally experienced short-term declines.

Gold markets experienced a rare “failure of safe-haven” as oil prices fell sharply and market risk aversion cooled. Gold prices declined on Monday, with COMEX gold futures dropping to $1,502.1 per ounce, and currently rebounding to $1,518.2 per ounce.

A market trader told reporters that in this round, gold’s financial attributes are outweighing its commodity nature—rising oil prices have sparked concerns about further Fed rate hikes, with higher interest rates being the biggest pressure on gold. This rare “co-movement” of oil and gold reflects the current market’s complex pricing logic.

In the forex market, Asian currencies found a brief respite. OCBC strategists noted that the sharp decline in energy prices significantly eased imported inflation pressures in Asian economies, allowing previously impacted currencies to rebound. The current softening of the dollar has revived arbitrage opportunities in emerging markets, but markets remain tense. The bank also warned that shipping safety in the Strait of Hormuz has not fully normalized, and until clearer signs of de-escalation emerge, forex markets will remain highly sensitive.

Further analysis by Guoxin Securities indicated that, over the longer term, regional conflicts have limited impact on major assets. Over a one-week to one-month horizon, equities often recover—e.g., the median rise of the S&P 500 is 1.4%, with an 83% probability of gains; emerging market stocks also mostly rebound. Conversely, the initially strong dollar and commodities tend to weaken, with probabilities of rising for dollar and oil at 33% and 42%, respectively.

(Source: Yicai)