Crude Collapse: Brent Slides to $65 as Geopolitical Risk Premium Evaporates

Oil prices fell more than 4% on Feb. 2, with Brent dropping to $65.98 and WTI to $61.84, as easing U.S.–Iran tensions and a stronger dollar erased much of January’s geopolitical risk premium.

Oil prices slid more than 4% on Monday, Feb. 2, after an apparent thaw in tensions between the U.S. and Iran, following Donald Trump’s claim that Tehran was “seriously talking” with Washington. A stronger dollar, fueled by the nomination of Kevin Warsh as the next U.S. Federal Reserve chairman, also added further pressure on crude.

UBS analyst Giovanni Staunovo noted that easing Middle East tensions and reduced supply disruptions in the U.S. and Kazakhstan weighed on prices. The U.S. President’s remarks on Saturday followed comments from Tehran’s top security official Ali Larijani, who confirmed negotiations were being arranged.

Persistent threats of U.S. intervention had supported oil prices throughout January, but analysts said the tentative willingness to negotiate has erased much of the geopolitical risk premium. “The weakness in oil this morning is the combination of disappearing geopolitical risk and the uptick in the dollar,” explained PVM analyst Tamas Varga.

This inflationary surge presents a dual threat: it forces central banks to adopt hawkish monetary stances—potentially raising interest rates—which can dampen consumer spending and stifle overall GDP growth.