RBC's Helima Croft on what needs to be done to cool volatility in the oil market

Core Insights - The ongoing conflict has significant implications for the energy market, with potential disruptions expected to last for weeks despite the president's comments suggesting a quick resolution [1][2][5] - The market is closely monitoring the situation for any signs of de-escalation, as the timeline for the conflict remains uncertain [2][3][9] Energy Market Impact - Current estimates indicate that approximately 6 million barrels of oil production are currently shut in across the Middle East, which is more than double previous expectations related to disruptions from Russia [5] - The volatility in crude oil prices, with WTI fluctuating between $120 and below $90, reflects market reactions to changing assumptions about the conflict's duration and impact [7][8] Geopolitical Considerations - The potential involvement of the Houthis in the conflict poses additional risks to oil infrastructure, particularly the Yamu port, which could be targeted by drone attacks [4][5] - The effectiveness of military operations against Iranian capabilities, particularly regarding drones, remains a concern, as Iran continues to maintain significant drone manufacturing capabilities [10][11] Market Sentiment - The market appears to be reacting to President Trump's statements, with a notable increase in oil prices following comments about unconditional surrender, indicating a sensitivity to geopolitical developments [8] - The definition of success in the conflict, as articulated by the president, will be crucial for market expectations, particularly regarding the timeline for resuming oil production [9][12]