To The Moon

Confirmation from U.S. President Donald Trump that negotiations with Iran are underway has caused the geopolitical risk premium to recede, while international oil prices have also been swept up in a broader commodities sell-off, leading to a significant decline. Brent crude prices plummeted by over 7% at one point and are currently trading near $66 per barrel, while West Texas Intermediate crude prices are approaching $62 per barrel. Over the weekend, threats of a regional war from Iran's Supreme Leader Ayatollah Ali Khamenei were downplayed by Trump, who reiterated that a deal with Iran remains possible. "The drop in oil prices is more about a readjustment of market positioning than a fundamental shift in the underlying supply-demand dynamics," said Harris Khurshid, Chief Investment Officer at Caloba Capital LP. "There is no new supply shock; the market had priced in expectations of a short-term supply disruption that did not materialize, and as the market recalibrates, oil is giving back some of that risk premium." The commodities market—particularly the metals sector—experienced heavy selling, which also dragged down crude oil prices. Gold prices fell sharply by up to 10%, and copper dropped over 5%, continuing a decline that began last Friday after significant gains in recent weeks. A recent strengthening of the U.S. dollar has also increased the cost of crude purchases for buyers in many countries. In January, Trump's threats of military action over Iran's forceful suppression of protests escalated U.S.-Iran tensions over several weeks, bringing the two sides to the brink of conflict and causing a sharp rise in international oil prices. This situation heightened the risk of supply disruptions from a region accounting for about one-third of global crude supply, temporarily diverting market attention from the growing global oil glut. Meanwhile, Ukrainian President Volodymyr Zelenskyy announced that the next round of trilateral talks involving the U.S., Russia, and Ukraine will take place in Abu Dhabi on February 4-5. Previous negotiations aimed at ending the Russia-Ukraine conflict have seen little breakthrough; the conflict is about to enter its fifth year and has led to multiple sanctions on Russian oil trade. In other developments, despite the recent significant price increases, OPEC and its allies (OPEC+) formally approved plans to maintain stable output levels in March, marking the final phase of the group's three-month production freeze plan.