Oil's sharp fall from $119 to $81: What's next as de-escalation signals emerge?

Volatile oil market amid Middle East tensions

As the latest Middle East conflict enters its eleventh day, oil markets have experienced exceptional volatility.

Yesterday morning, West Texas Intermediate (WTI) crude oil surged a staggering 31% to an intraday high of $119.48, fuelled by panic over the escalating United States (US)-Israeli standoff, as markets priced in the nightmare scenario of sustained global energy disruption.

With equity markets on a knife-edge and the global economy including Australian households impacted by higher crude oil prices through increased food and transportation costs, a much-needed off-ramp emerged late in the day.

Reports that the Group of Seven (G7) stands ready to tap strategic petroleum reserves were followed by signs of partial tanker traffic resuming through the Strait. Additional support came from President Trump's CBS interview, where he described the US-Israeli campaign as 'very complete, pretty much' and 'very far ahead of schedule.' The combination of these events shifted sentiment from stagflation fears to outright relief, sending WTI plummeting toward $81 early this morning.

Geopolitical developments lead to market reactions

While short-term panic has eased, the 'very complete' narrative is hard to fully embrace. The Strait of Hormuz remains largely blocked for commercial traffic, and Iran's appointment of Mojtaba Khamenei – son of the slain Ayatollah Ali Khamenei – as the new Supreme Leader signals continuity in the regime's hardline posture.

That said, parallels are emerging with Operation Midnight Hammer, the joint US-Israel strikes on Iran last June, which concluded after 12 days. We are approaching that same timeframe now, and Trump's rhetorical shift – from earlier demands for unconditional surrender to today's more measured tones – marks a clear de-escalation signal, suggesting he is following the Midnight Hammer playbook.

While this de-escalation is yet to qualify as a full 'Trump Always Chickens Out (TACO)', it feels like the appetiser: laying the groundwork for a potential pivot by week's end.

This could materialise if the US and Israel complete their planned strikes on remaining regime military and weapons targets, and Iran's new leadership proves willing to prioritise regime survival over further escalation.

If this scenario plays out, energy prices would likely ease further, providing a boost to equity markets and President Trump's approval ratings ahead of midterms, now just eight months away.

Crude oil technical analysis

At the beginning of March, WTI crude oil decisively broke above the top of its $55 – $66.50 range, a band it had traded within for the past seven months. This was quickly followed by a significant gap higher at the start of last week, and then a clear break above the January 2025 high of $80.77, as it powered all the way to yesterday’s $119.48 peak.

While yesterday's extreme volatility has certainly left the charts looking a bit messy, the defining feature of the session was that solid upside rejection. This strongly suggests a retest of $120 is unlikely in the foreseeable future.

Therefore, while we expect crude oil to remain highly volatile, we anticipate it will trade for the remainder of this week within a wide range between $75 and $105.

Crude oil daily candlestick chart

Gold technical analysis

The technical picture for gold has become clearer as the dust settles following its flash crash in late January. The sell-off from the $5602 high down to the $4402 low is clearly defined as the first wave (Wave A) of a three-wave correction.

The rally from that $4402 low to the early March $5419 high counts as a Wave B (the second leg of the correction).

If gold now sees a break below a band of support at $5100 – $5000, it will signal that the third leg lower (Wave C) of a three-wave correction has begun, with a likely return towards $4400.

From a fundamental perspective, we favour this interpretation for two reasons.

Firstly, if the Middle East conflict extends and results in higher energy prices and higher inflation, it will result in a higher US dollar and reduce the chance of Federal Reserve (Fed) rate cuts, which is negative for gold.

Secondly, a rapid de-escalation in the Middle East would effectively remove one of the main geopolitical pillars that propelled gold to record highs earlier this year. Both scenarios are bearish in the short to medium term.

Gold  daily candlestick chart

• _{Source: TradingView. The figures stated are as of 10 March 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}