Washington, March 25 – Oil markets experienced sharp swings as investors weighed the fears of a prolonged conflict in the Middle East against signs of possible diplomatic progress, with prices briefly topping $100 before retreating.
Wall Street struggled for direction. Crude oil prices rose, while bond prices fell and stocks declined, according to reports by The Wall Street Journal.
The price of front-month Brent crude rose by 4.6 per cent to $104.49 a barrel, while West Texas Intermediate rose by 4.8 per cent to $92.35, the Journal reported.
These gains came after reports that the Pentagon was deploying a combat brigade to the Middle East, even as President Donald Trump signaled that peace talks with Iran were progressing.
Investors were left searching for direction as markets reacted to both escalation risks and diplomatic signals.
Analysts warned that sustained high oil prices could act as a drag on economic growth. "The longer oil stays high, it's almost like an automatic governor on the economy," said David Lundgren, a portfolio manager and chief market strategist at Little Harbor Advisors.
The volatility extended across asset classes. The Nasdaq fell 0.8 per cent, the S&P 500 dipped 0.4 per cent, and the Dow Jones Industrial Average slipped slightly, while Treasury yields climbed.
Market participants also flagged the risk of a broader economic shock. "An oil-price surge is going to be a stagflationary shock to the economy," said Qian Wang of Vanguard.
At the same time, traders bet that prices could rise further. Wagers on Brent reaching $110 a barrel were among the most popular positions, reflecting expectations that supply disruptions could persist.
However, sentiment shifted later in the day as signs of diplomacy emerged. Oil prices fell in early trade on "signs of progress in resolving the Middle East conflict," with analysts pointing to "pledges for peace in the region, with the assistance of Pakistan, Qatar, and others," according to The Wall Street Journal.
Trump also insisted that his administration was in talks with Iran and referred to an oil- and gas-related "gift" from Tehran, the Journal reported.
Despite these signals, economists cautioned that any relief in energy prices would be slow. "Prices rise like a rocket, fall like a feather," said Mark Zandi, chief economist at Moody's Analytics, as reported by The New York Times.
Even if the conflict ends quickly, it could take "six to eight weeks for oil production and shipments to normalize," analysts told The Times, with prices likely to settle above pre-war levels.
Industry executives echoed the uncertainty. "We don't have any idea where the price is going to go," said Mike Sommers of the American Petroleum Institute, according to the Times.
There are also structural constraints. Gasoline prices remain elevated near $4 a gallon, and a drop in crude would take time to filter through refining and distribution systems, according to a CNN analysis.
Markets remain highly sensitive to developments around the Strait of Hormuz, a critical chokepoint for global oil flows. Disruptions there have amplified price swings and heightened geopolitical risk.