Oil plunges and erases the geopolitical premium: Brent falls below $66

Crude oil prices were hit by statements from U.S. President Donald Trump, who confirmed the start of talks between Washington and Tehran, scaling back fears of a regional conflict. Brent crude fell by more than 7%, dropping into the $66-per-barrel range, while WTI hovered around $62.

According to market participants, the move reflects more a rebalancing of speculative positions than a real shift in market fundamentals. “In the absence of new supply shocks, oil is simply giving back part of the risk premium built up in recent weeks,” explained Haris Khurshid, chief investment officer at Karobaar Capital LP, noting that expectations of imminent supply disruptions have failed to materialize.

The decline in crude is part of a broader sell-off across commodities. Precious and industrial metals were particularly hard hit: gold lost up to 10%, while copper fell by more than 5%, extending the correction that began after recent strong gains. A stronger dollar has also weighed on prices, making dollar-denominated commodities more expensive for international buyers.

In previous weeks, oil had benefited from rising tensions between the United States and Iran, fueled by Trump’s threats in response to the repression of protests in Iran. The risk of disruptions in a region that produces about one third of the world’s crude oil had temporarily overshadowed concerns about a global oversupply.

On the international front, there has been little progress in negotiations over the war in Ukraine as well: new trilateral meetings between the United States, Russia, and Ukraine are scheduled for February 4 and 5 in Abu Dhabi, following talks that have so far proved inconclusive. Meanwhile, OPEC+ has confirmed that production levels will be maintained in March as well, completing the final month of the supply freeze despite the recent price rally.

Andrea Pelucchi