Oil Is Not a Trend — It Is a Market of Swings

The recent price action in crude oil has been shaped less by fundamentals and more by political headlines, particularly those linked to Donald Trump (as shown by Bloomberg). The latest ceasefire in the Middle East proved to be extremely short-lived, collapsing within a day. Israel resumed operations in Lebanon, while Iran reacted by attempting to block the Strait of Hormuz, causing the entire arrangement to unravel. At its core, the issue appears to have been a mismatch in expectations: what one side viewed as a limited pause, the other interpreted as a broader ceasefire. Lovely, that the market’s response looked overly optimistic the day before yesterday, with participants selling oil as if risks had materially subsided.

In practice, the situation has not improved — it has deteriorated. As the conflict widens, volatility is re-emerging, and in a particularly aggressive way. This is not an environment conducive to steady, directional moves; rather, it is defined by abrupt and often unpredictable price swings over very short periods.

Under current circumstances, it is difficult to define a single scenario. Instead, the outlook is best understood as a spectrum of possible “cases”, each carrying a significant degree of uncertainty.

Over the coming weeks, two main paths appear plausible, neither of them reassuring. On the one hand, there may be renewed diplomatic efforts, resulting in another temporary and fragile pause — one that the market may initially price in positively before confidence fades once again. On the other hand, the conflict could continue to escalate, in which case prices are likely to rise sharply, driven primarily by an expanding risk premium. For now, a stable and predictable outcome does not appear to be a realistic expectation.

Ultimately, the situation is fairly straightforward. The market has once again shown its tendency to embrace convenient narratives when they offer the prospect of quick returns, only to be confronted by harsher realities shortly thereafter. Consequently, what we are seeing in oil is not a sustained trend, but a series of pronounced swings. The key consideration is no longer direction, but rather the scale and speed of the next move.

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