Why are oil prices down by 5% and will it continue to fall or rise again? Oil prices dropped nearly 5% in one session after signs of easing tensions between the United States and Iran. Markets reacted to comments from President Donald Trump that Iran was in talks with Washington. These remarks reduced concerns of conflict involving an OPEC member. The fall also came as commodity markets moved lower and the US dollar gained strength. Brent crude and US crude both moved away from multi-month highs reached earlier due to geopolitical concerns.

Why are oil prices down by 5% and will it continue to fall or rise again?

Oil prices are down by 5% due to easing tensions between the United States and Iran. President Donald Trump said Iran is talking with Washington, which reduced fears of conflict involving an OPEC member. Brent and WTI crude fell from multi-month highs as traders removed the geopolitical risk premium added earlier. The fall was also linked to a broader sell-off in commodity markets, including gold and silver. A stronger US dollar added pressure, as it made dollar-priced oil costly for buyers outside the United States. OPEC+ also decided to keep output unchanged, reinforcing concerns about ample supply in the oil market.

Market reacts to US-Iran signals

Oil prices fell nearly 5% on Monday after comments suggested reduced tensions between the United States and Iran. Brent crude futures fell $3.38, or 4.9%, to $65.94 per barrel at 0528 GMT. US West Texas Intermediate crude dropped $3.33, or 5.1%, to $61.88 per barrel.

Prices moved lower after US President Donald Trump said Iran was “seriously talking” with Washington. The statement followed comments from Iran’s top security official Ali Larijani, who said arrangements for talks were underway. These signals lowered fears of military action involving Iran.

The oil market had priced in risks during January due to repeated warnings from Trump. He had said the US could act if Iran refused a nuclear deal or continued actions against protesters. These risks supported oil prices earlier, according to analysts.

Dollar strength and commodity sell-off

Oil prices also fell as commodity markets declined. Gold and silver saw losses during the session. Analysts linked part of the move to a stronger US dollar. When the dollar rises, oil priced in dollars becomes costly for buyers using other currencies.

Priyanka Sachdeva of Phillip Nova said the renewed strength in the US dollar added pressure on oil prices. This currency move reduced demand from non-US buyers and supported the price drop.

Why are oil prices down by 5%?

Oil prices fell by 5% mainly because of easing tensions between the United States and Iran. President Donald Trump said Iran was “seriously talking” with Washington, reducing fears of a conflict involving an OPEC member. Brent and WTI crude retreated from multi-month highs. A broader sell-off in commodities, including gold and silver, and a stronger US dollar also contributed to the decline. OPEC+ keeping output unchanged for March added to the market’s bearish sentiment, signaling that supply remains sufficient while geopolitical risk premiums eased.

Will oil prices continue to fall or rise again?

Oil prices may continue to face pressure if US-Iran talks progress and tensions stay low. Analysts say the market is well supplied, and demand remains seasonally weak. A strong US dollar could further weigh on prices. However, oil prices could rise again if talks break down, geopolitical risks return, or supply disruptions emerge. Any changes in OPEC+ policy or unexpected shifts in global demand may also impact prices. Investors are watching diplomatic updates, currency movements, and supply data closely.

OPEC+ and supply outlook

At a meeting on Sunday, OPEC+ agreed to keep oil output unchanged for March. The group had already paused planned supply increases from January through March 2026 due to lower seasonal demand.

Despite earlier gains driven by geopolitical risks, analysts say the oil market remains well supplied. Capital Economics said geopolitical risks are masking a bearish oil market. The firm noted that last year’s 12-day conflict between Israel and Iran did not disrupt supply in a lasting way.

Tony Sycamore of IG said the oil market is removing the geopolitical risk premium built into prices during last week’s rally. This has led to profit-taking by traders.

Analysts insights and market outlook

Analysts expect oil prices to remain influenced by diplomacy, currency moves, and supply levels. If US-Iran talks continue, risk premiums may reduce further. However, any shift in talks or supply policy could change the trend.

What should investors do now?

Investors should monitor geopolitical developments, especially US-Iran talks, as they influence oil prices. They should also track OPEC+ supply decisions and global demand trends. A strong US dollar can pressure oil, so currency movements matter. Traders may consider risk management strategies, including diversifying portfolios or using hedging tools, to protect against sudden price swings. Short-term volatility is likely, so cautious, informed decisions are recommended. Investors can focus on long-term fundamentals such as global supply-demand balance while avoiding decisions based solely on recent price drops.

FAQs

Q1: Why are oil prices down by 5% and will it continue to fall or rise again?
Oil prices fell after US-Iran tensions eased, the US dollar rose, and traders booked profits. Future movement depends on diplomacy, dollar trends, and supply decisions.

Q2: How does OPEC+ output affect oil prices?
OPEC+ decisions on oil production directly impact supply levels. Keeping output unchanged can pressure prices if demand is weak, while production cuts can support higher crude prices.