Brent oil slips to $88 level, down 26% from Monday’s high: What’s behind the reversal?

From Monday's high of $119.50 a barrel level, Brent crude oil futures for May delivery took a U-turn, falling below $90 a barrel mark on hopes the US-Israel war with Iran may be nearing its end. While it was earlier reported the Iran war would take four-five weeks, the US President Donald Trump has reportedly said the US and Israel were close to achieving their war objectives and that the conflict could be over “very soon”, even as he clarified it would not end this week.
The West Asia produces one-third of the world’s crude and the Strait of Hormuz is the second biggest choke point for the fuel in the world. Brent crude prices, which were below $70 a barrel just a month ago touched $119.50 a barrel level briefly on Monday, with TTF gas prices rising 90 per cent month-on-month. 
That said, Brent futures were last trading at $88.10 a barrel, down 26.27 per cent over Monday's high.

"Overtures are being made to Russia with American permission but discounts erstwhile available have evaporated in the supply shock. In this context, it must be noted that the declining trajectory of inflation worldwide was majorly supported by benign fuel prices in the past year and these developments pose a significant risk to the same. Policymakers must act in time to ensure that the impact of energy inflation does not spillover to other commodities in FY27,"  SBI Capital Markets said in a note.

The higher crude prices had stoke fears that the RBI’s policy may need to change course. But whether inflation or currency concerns will dominate its thinking remained an open question.

"For now, the RBI is trying to manage all fronts by compensating for the INR dried up in forex markets with domestic bond buying. Policy appears to be entering a difficult phase where it adheres to the Anna Karenina principle rather than the Goldilocks narrative," SBI Capital Markets noted.

Comments from Donald Trump suggesting that the US–Israel conflict with Iran could conclude soon have triggered a decline in crude oil prices and the US dollar, helping restore risk appetite across global markets, said  Ponmudi R, CEO at Enrich Money.

"US. equities closed the previous session in positive territory, while Asian markets are showing signs of recovery following the drop in oil prices, indicating a modest improvement in global sentiment," he said.

G7 nations, meanwhile, said they were ready to take necessary measures to support the global supply of energy. But the meeting of G7 finance ministers and the International Energy Agency (IEA) ended without an agreement to release strategic crude reserves.

Trump earlier said that the US Navy could escort tankers through the Strait of Hormuz in an effort to keep oil prices in check.