02-02-2026
Oil prices fell by more than $1 per barrel as the market reacted to easing geopolitical tensions and multiple supporting factors. After a strong rally in January, crude oil prices faced selling pressure as traders reassessed risk and fundamentals.
The biggest trigger for the fall was the reduction in geopolitical tension between the United States and Iran. Earlier, oil prices were supported by fear of a possible conflict that could disrupt Middle East supply. However, recent statements from both sides confirmed that talks are taking place. This reduced the fear premium built into oil prices.
According to Iranian news agency Tasnim, the time and location of possible Iran–US talks have not been finalized yet, but discussions may happen in the coming days. Iran’s Abbas Araghchi and US representative Steve Witkoff are expected to take part. If these talks move forward and tensions ease, global risk sentiment could improve. This may put slight pressure on crude oil prices due to expectations of higher supply, and could also lead to some softening in gold prices.
When tension reduces, the risk premium
disappears and prices correct. As a result, traders who had built long
positions at higher levels started profit booking, pushing prices lower.
Reasons Supporting the Fall
1. Strong US Dollar
Crude oil is priced in U.S. dollars. When the dollar strengthens, oil becomes more expensive for countries using other currencies. This reduces buying interest globally and puts pressure on oil prices.
2. OPEC+ Keeping Supply Steady
OPEC+ agreed to keep oil output unchanged for March 2026, even after prices had climbed to multi-month highs on earlier geopolitical concerns. This means the group did not announce new production cuts or a reduction in supply, which reassured the market that there is no immediate shortage of crude. When supply remains stable and there’s no sign of tighter availability, it takes away a key reason for prices to rise further. Traders interpreted this as a sign that the market is not as tight as before, which helped support the recent price correction.
Impact on Commodity Markets
The fall in
oil prices does not suggest weak demand. Instead, it shows that the market is
normalizing after a strong rally. With geopolitical risks easing and supply
stable, traders are now shifting focus back to fundamentals like demand growth,
inventory data, and currency movement.
Conclusion
Oil prices corrected mainly due to easing US–Iran tensions, a stronger dollar, steady OPEC+ supply, and an overbought market structure. Going forward, oil prices will remain sensitive to geopolitical developments, dollar strength, and demand indicators.
02-02-2026
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