Middle Eastern "Black Swan" Triggers Epic Volatility: Oil Prices Surge and Plummet, Traders Cry Out "Total Panic"

CNBC Finance APP learned that even by the standards of the rollercoaster swings in the global oil market, Monday’s extreme volatility tested traders’ limits. As the world’s most traded commodity, the benchmark crude oil contract price surged by as much as 29% over the weekend amid relentless negative news of the Middle East crisis deepening.

With oil-producing countries in the Persian Gulf effectively freezing output, and maritime traffic through the Strait of Hormuz nearly at a standstill, and no solution in sight, Brent crude futures soared to nearly $120 per barrel in the first few hours of trading, reaching a mid-2022 high. However, market sentiment suddenly shifted, forcing traders to make emergency reversals.

The two largest contracts in the oil market ultimately closed lower, giving back most of the day’s gains.

“I like this kind of volatility, but it’s exhausting,” said Toby Copson, China Portfolio Manager for Oil & Gas Trading at Davenport Energy, a commodities trading firm. “Everyone is working overtime, and few of us are getting a good night’s sleep. Fundamentally, we understand the drivers behind it, but all the headlines and tweets are constantly testing our stress limits.”

The G7’s move to pave the way for coordinated release of strategic oil reserves initially cooled the early gains. Later, President Trump commented that the conflict might end soon. Despite the lack of details, this shift in tone quickly cooled the market. For Brent crude, this was its largest intraday-to-close decline in history, with volatility comparable to that during the COVID-19 pandemic.

Traders usually profit from market swings, but such intense turbulence like Monday’s is rare. The week’s ongoing dramatic headlines and sharp asset price swings even unsettled some seasoned market veterans, reminiscent of the commodity price surge triggered by the Russia-Ukraine conflict in 2022, and earlier, the historic brief plunge into negative territory for WTI futures in 2020.

“This is pure panic trading,” said Nick Twidale, Senior Analyst at AT Global Markets, with 27 years of market experience. “By 6 a.m. Monday, I was already at my desk in Sydney. My phone rings every 10 seconds—ding, ding, ding—from traders, clients, and industry insiders all asking the same question: ‘What’s going on with oil?’”

The Middle East crisis began at the end of last month when U.S. and Israeli forces launched attacks on Iran. Tehran retaliated against regional bases and infrastructure, disrupting the entire Persian Gulf region. Before Monday’s open, markets grew increasingly worried about how long this war, which is already impacting the global economy, might last.

“When geopolitical decisions dominate price movements, investors feel out of control,” said Stefano Grasso, Senior Portfolio Manager at Singapore-based hedge fund 8VantEdge Pte, who previously traded crude oil and LNG. “What the market is experiencing now is not just volatility but a sense of helplessness.”

Beyond oil, other commodities such as base metals, precious metals, and agricultural products also experienced sharp swings on Monday. Traders are trying to digest market dislocations already apparent and potential future troubles. Aluminum prices hit their highest level since 2022, silver plunged nearly 6%, and gold fell under pressure due to a stronger dollar.

The natural gas market also faced turmoil. As oil prices surged, Asian LNG buyers—especially those in emerging markets—panicked, fearing a global supply scramble. The ongoing shutdown of Qatar’s largest LNG export plant, triggered by the war, shows no signs of ending.

Traders said GAIL India Ltd. failed to secure a batch of March-delivered LNG cargoes through bidding on Monday, noting there were no available surplus LNG ships that month. They added that Thai buyers are trying to lock in recent shipments from Malaysia and other suppliers.

“The best approach is discipline: keep positions reasonable and focus on risk management rather than predictions,” Grasso said. “The market is trying to price in potential political decisions that could change overnight, which naturally causes wild swings.”

The frenzy in oil prices continued into Tuesday, with NYMEX-listed crude triggering a circuit breaker within the first two minutes of trading. After trading resumed, WTI futures fell as much as 11%, though they remain above pre-war levels.

“Have the worst already passed? Maybe,” Twidale said. “Trading now is just following every headline, which is very difficult.”