Oil Falls 13 Percent in the Largest Single-Day Drop Since the Iran War Began

NEW YORK — Oil prices crashed by as much as 13 percent on Monday in the largest single-day decline since the Iran war began on 28 February, after President Donald Trump announced a five-day pause on threatened strikes against Iranian energy infrastructure and claimed that “very good and productive conversations” with Tehran were under way. West Texas Intermediate crude plummeted to $88.70 per barrel — its lowest level in nearly a month — while Brent crude fell more than seven percent to $104, erasing weeks of war-driven gains in a matter of hours. The Dow Jones Industrial Average futures surged 1,100 points, and an estimated $1.7 trillion was added to United States stock markets within minutes of Trump’s announcement, according to Bloomberg.

The swing marks the sharpest reversal in energy markets since the US-Israeli coalition launched its offensive against Iran on 28 February. It also exposes the fragility of the war premium that has propped up global oil prices above $100 per barrel for three consecutive weeks. For Saudi Arabia, which has seen its oil export revenue constrained by the Strait of Hormuz closure even as benchmark prices climbed, the sudden drop raises uncomfortable questions about how long elevated prices can offset reduced export volumes — and what happens to the Kingdom’s fiscal position if diplomacy succeeds where military force has not.

What Triggered the Oil Price Crash on March 23?

The immediate catalyst was a post by Trump on Truth Social in which he wrote in all capitals that the United States and Iran had held “very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East.” Trump instructed the Department of Defense to postpone “any and all military strikes against Iranian power plants and energy infrastructure” for a five-day period, subject to what he called the success of ongoing discussions.

The announcement came hours before a 48-hour deadline Trump had issued on Saturday, threatening to strike Iran’s power grid if Tehran did not reopen the Strait of Hormuz to international shipping. That ultimatum had sent Asian stocks plunging and oil past $114 per barrel in early Monday trading. The reversal, when it came, was equally violent.

CNBC reported that WTI crude fell as much as 13 percent to around $88.70 per barrel, its lowest since the war began. Brent crude, the global benchmark that determines the price Saudi Arabia receives for its crude exports, dropped more than seven percent to around $104 per barrel after briefly touching $90 intra-day. The plunge represented the largest single-session decline in oil prices since 2020, according to Reuters data.

Yet the diplomatic optimism fuelling the sell-off stood in direct contradiction to events on the ground. Even as markets celebrated the prospect of peace, the Israeli military launched what Al Jazeera’s correspondent in Tehran described as “unprecedented” strikes on the Iranian capital’s eastern districts, and Iran’s Islamic Revolutionary Guard Corps fired ballistic missiles at Riyadh and the Prince Sultan Air Base in Saudi Arabia.

The Numbers Behind the Market Reversal

The scale of the market swing was extraordinary by any historical measure. Bloomberg reported that $1.7 trillion was added to American equity markets within minutes of Trump’s announcement, making it one of the fastest wealth-creation events in Wall Street history. The move reflected the enormous economic cost the war had imposed on global markets since 28 February, and the desperation among investors for any signal that the conflict might end.

The oil sell-off was particularly notable because it took prices below $100 for the first time since the Strait of Hormuz was effectively closed in early March. Before the war, Brent crude had been trading around $75 per barrel. The conflict pushed it above $110, peaking at $119 briefly on 20 March when Iran struck Gulf energy facilities after Israel targeted Iran’s South Pars gas field. The International Energy Agency had warned that the crisis already surpassed the 1970s oil shocks in severity.

Energy traders described the move as a “relief rally” rather than a fundamental re-pricing, with most cautioning that the five-day pause was not a ceasefire and that prices could snap back higher if talks failed. Analysts at Goldman Sachs noted that the structural supply deficit caused by the Hormuz closure — removing approximately eight million barrels per day from global markets — remained unresolved regardless of diplomatic signals.

Trump’s Five-Day Pause and Iran’s Denial

The credibility of the diplomatic breakthrough that triggered the market reversal remains deeply uncertain. Within hours of Trump’s claim of “productive conversations,” Iran’s foreign ministry responded through state media that “there is no dialogue between Tehran and Washington,” calling the announcement a ploy to manipulate markets and domestic opinion.

However, a senior Iranian foreign ministry official offered a more nuanced position to CBS News, confirming exclusively that “we received points from the US through mediators and they are being reviewed.” This acknowledgment — the first from any Iranian official that some form of communication had occurred — suggested that indirect contacts via third-party intermediaries may be happening even as both sides publicly deny direct negotiations.

The five-day pause on strikes against Iranian energy infrastructure does not constitute a ceasefire. Israeli military operations continued throughout Monday, with the IDF conducting what it described as a “wide-scale wave of strikes” on infrastructure targets in Tehran. Iran’s defence council responded by threatening to mine the “entire Persian Gulf” with naval mines and to strike power plants across the region if its own energy infrastructure was targeted.

Trump’s chief stated goal remains stopping Iran from possessing a nuclear weapon. He asserted that Iran must surrender its enriched uranium stockpile for any deal to hold. Iran’s foreign minister, Abbas Araghchi, has repeatedly stated that Tehran “never asked for a ceasefire” and is “ready to defend ourselves as long as it takes.” The contradiction between market optimism and diplomatic reality could not be starker.

How Does the Oil Drop Affect Saudi Arabia’s Revenue?

Every dollar decline in the price of a barrel of oil costs Saudi Arabia approximately $3 billion in annual revenue, according to estimates from the International Monetary Fund. The 24-day war had created a paradox for the Kingdom: higher oil prices but reduced ability to sell. The sudden crash on Monday exposed how vulnerable Saudi Arabia’s fiscal position has become to market sentiment rather than fundamentals.

Before the war, Saudi Arabia was exporting approximately six million barrels per day through its eastern terminals at Ras Tanura, Ju’aymah, and Ras al-Khair, with most transiting the Strait of Hormuz. Since Iran’s blockade, Aramco has been forced to reroute crude through the 1,200-kilometre East-West pipeline to the Red Sea port of Yanbu, where loadings have averaged 2.2 million barrels per day in March — less than half the Kingdom’s pre-war export capacity, according to MercoPress.

The arithmetic is punishing. Even at $110 per barrel, Saudi Arabia earning revenue on only 2.2 million barrels per day generates roughly $242 million daily — significantly less than the approximately $450 million per day it earned at $75 on six million barrels before the war. If Brent settles closer to $90 in the wake of the five-day pause, daily revenue drops further to approximately $198 million.

Goldman Sachs estimated in a research note earlier this month that Saudi Arabia could face a three percent GDP contraction if the war continues through April with the Strait of Hormuz remaining closed. Aramco reported $104.7 billion in adjusted net income for 2025, down five percent year-over-year. The war threatens to accelerate that decline sharply in 2026.

Aramco’s Operational Crisis Gets More Complicated

Saudi Aramco was already managing what its executives have privately described as the largest operational crisis in the company’s history when the market crash added a new variable. The state energy giant has reduced production by between two million and 2.5 million barrels per day since the Hormuz closure, according to Reuters, and cancelled appearances at the annual CERAWeek energy conference in Houston as war demands kept senior leaders in the Kingdom.

The East-West pipeline to Yanbu can theoretically move up to seven million barrels per day, of which five million would be available for export. But pipeline capacity is not the binding constraint. Yanbu’s port infrastructure, tanker availability, and the security of the Red Sea route — which still requires passage through the Bab el-Mandeb strait — all limit actual throughput. An Iranian drone struck the SAMREF refinery at Yanbu on 19 March, briefly suspending loadings and demonstrating that the Red Sea bypass is not immune to attack.

Aramco cut oil supply allocations to Asian customers for the second consecutive month in March, raising official selling prices for Arab Light crude by $2.40 per barrel even as it reduced volumes. The combination of higher prices and lower supply has strained relationships with key buyers in China and India, both of whom have been negotiating directly with Saudi officials for preferential access to Yanbu crude.

If the five-day pause evolves into a genuine diplomatic process and oil prices stabilise below $100, Aramco would face the worst of both worlds: reduced volumes from the Hormuz closure combined with lower benchmark prices. The company’s break-even fiscal price for Saudi Arabia’s government budget is estimated at approximately $80 per barrel, a threshold that looked comfortable at $115 but increasingly fragile at $90.

OPEC member states moved to partially offset the supply gap, agreeing to boost collective output by 206,000 barrels per day — a larger-than-expected increase that nonetheless represents a fraction of the eight million barrels per day removed from global markets by the Hormuz shutdown. Saudi Energy Minister Prince Abdulaziz bin Salman has coordinated directly with OPEC Secretary General Haitham al-Ghais on the emergency allocation, according to two sources with knowledge of the discussions cited by Bloomberg.

The Tadawul stock exchange in Riyadh showed relative resilience through Monday’s trading session, with Saudi Aramco shares closing at 27.06 Saudi riyals against a previous close of 27.10 — a decline of less than 0.2 percent. The Tadawul had closed before Trump’s afternoon announcement reached markets, meaning the full impact of the oil price crash on Saudi equity valuations will not register until Tuesday’s session. The Tadawul reopening on 24 March after an eight-day Eid break will force the market to absorb not just Monday’s oil crash but the accumulated escalation of the entire holiday period. Analysts at HSBC expect Aramco’s stock to face downward pressure if Brent remains below $105 for more than 48 hours, given the company’s reduced export capacity.

Global Economic Contagion and the UK Emergency

The oil price volatility is rippling through global economies in ways that underscore the war’s reach beyond the Persian Gulf. Hours before Trump’s announcement, British Prime Minister Keir Starmer convened an emergency COBRA meeting to address the war’s economic impact on the United Kingdom, with Bank of England Governor Andrew Bailey, Chancellor Rachel Reeves, and Energy Secretary Ed Miliband in attendance, Reuters reported.

Britain’s government bond yields surged to their highest level since the 2008 financial crisis, driven by the country’s heavy dependence on imported natural gas and the knock-on effects of the Hormuz closure on global energy supply chains. Economists warned that the energy price shock could push British inflation back to five percent later in 2026, according to multiple forecasts cited by the Financial Times, dealing another blow to an already slow-growth economy.

“I am asking for every lever that’s available to the government to deal with the cost of living to be discussed at Cobra,” Starmer told reporters, signalling that London viewed the energy crisis as an immediate domestic emergency rather than a distant foreign policy concern.

The IMF had already downgraded its global growth forecast in response to the conflict, cutting projected world GDP growth from 2.8 percent to 2.5 percent under its high-energy-price scenario. The Fund estimated that a persistent 10 percent increase in oil prices reduces global output by 0.1 to 0.2 percentage points and raises headline inflation by approximately 40 basis points. With Brent crude still trading more than 30 percent above pre-war levels even after Monday’s crash, those effects remain firmly in play.

The Economist warned earlier this month that if the Strait of Hormuz remains closed through March, crude could surge to $150 or even $200 per barrel — conditions that would produce “a recipe for global recession and a surge in inflation, a repeat of the stagflation of the 1970s.” Monday’s sell-off offered a temporary reprieve, but the underlying supply disruption that created the crisis has not changed.

What Happens When the Five Days Are Up?

The five-day window expires on Saturday 29 March. If no tangible progress emerges — specifically, if Iran does not begin reopening the Strait of Hormuz — Trump has indicated that strikes on Iranian power plants and energy infrastructure will resume. Iran’s defence council has pre-emptively threatened to retaliate against Gulf power stations and to mine all navigable waters in the Persian Gulf if its energy grid is attacked.

For Saudi Arabia, the calculus is particularly complex. Crown Prince Mohammed bin Salman has been speaking regularly with Trump, according to the New York Times, and has privately urged Washington to “keep hitting the Iranians hard.” Gulf states that initially opposed the war have shifted their position after weeks of Iranian missile and drone attacks, with officials telling NBC News that Iran’s military must be “cut down” before any ceasefire takes effect.

Yet the prospect of a peace deal creates its own risks for Riyadh. A ceasefire that leaves Iran with its current missile arsenal and proxy network intact would, in the words of one Gulf official quoted by the Times of Israel, constitute “a strategic disaster.” Egyptian officials, meanwhile, have been working behind the scenes on a 30-to-60-day ceasefire framework specifically designed to prevent Saudi Arabia and the UAE from entering the war directly, according to NPR.

Markets are pricing in a roughly 40 percent probability that the five-day pause leads to substantive negotiations, based on options pricing in Brent crude futures. The remaining 60 percent probability accounts for the pause collapsing, a resumption of escalation, and a return to prices above $110. The uncertainty alone is costing the global economy billions of dollars per day in risk premiums, insurance costs, and supply chain disruptions.

What happens next depends on whether the mediators — likely Oman, which facilitated pre-war nuclear talks in Geneva, and possibly Egypt — can bridge the gap between Trump’s demand that Iran surrender its enriched uranium and Tehran’s insistence that it never started the war and will not negotiate from a position of weakness. For Saudi Arabia, the five days represent a window not just for diplomacy, but for a fundamental reassessment of whether the Kingdom’s interests are better served by continued conflict or a negotiated settlement that might leave its most dangerous regional adversary weakened but not defeated.

Frequently Asked Questions

Why did oil prices crash on 23 March 2026?

Oil prices dropped sharply after President Donald Trump announced a five-day pause on threatened strikes against Iranian energy infrastructure and claimed that “productive conversations” with Iran were happening. West Texas Intermediate crude fell as much as 13 percent to $88.70 per barrel, while Brent crude dropped more than seven percent to $104. The sell-off represented the biggest single-day oil decline since the Iran war began on 28 February 2026.

How much did the US stock market gain after Trump’s Iran announcement?

American equity markets surged within minutes of Trump’s announcement. Dow Jones Industrial Average futures jumped 1,100 points, the S&P 500 and Nasdaq Composite each gained 2.7 percent, and an estimated $1.7 trillion was added to total US market capitalisation. Bloomberg described it as one of the fastest wealth-creation events in Wall Street history, driven by relief that the war might be ending.

Is Iran actually negotiating with the United States?

The situation is ambiguous. Trump claims “very good and productive conversations” are under way, but Iran’s foreign ministry publicly denied that any dialogue has occurred. However, a senior Iranian official told CBS News exclusively that “we received points from the US through mediators and they are being reviewed,” suggesting indirect communication through third-party intermediaries is happening despite the public denials from both sides.

What does the oil price drop mean for Saudi Arabia?

Saudi Arabia faces a revenue squeeze from two directions. The Strait of Hormuz closure has already cut its daily exports from approximately six million barrels to about 2.2 million barrels routed through the Red Sea port of Yanbu. If benchmark prices also fall — with Brent dropping from $112 to $104 in a single session — the Kingdom earns less per barrel on far fewer barrels. Goldman Sachs has estimated Saudi Arabia could face a three percent GDP contraction if the war persists through April.

What happens when the five-day pause expires?

The pause expires on Saturday 29 March. If Iran has not begun reopening the Strait of Hormuz by then, Trump has signalled that strikes on Iranian power plants and energy infrastructure will resume. Iran’s defence council has pre-emptively warned that it will mine the entire Persian Gulf and target Gulf power plants in retaliation. Markets are pricing in roughly a 40 percent probability that the pause leads to real negotiations and a 60 percent chance of renewed escalation.