What happened

Shares of oil and gas giant Chevron (CVX -1.48%) tanked this morning and shed 2.5% within minutes of the market's opening. The oil stock managed to enter positive territory as the day progressed, but it was only a dead cat bounce. As of 1:30 p.m. ET on Thursday, Chevron stock was back in the red and trading 1.4% lower as crude oil prices slipped.

So what

The West Texas Intermediate crude oil price crumbled nearly 5% this morning to its lowest level in nearly a month, driven primarily by two factors.

First, COVID-19 cases in China continue to rise. This morning, Reuters reported cases in the nation have hit levels last seen in April, forcing more manufacturing hubs to extend lockdowns. Investors fear lockdowns and the consequential fall in manufacturing activity will hurt demand for oil from one of the world's largest oil-consuming nations.

Second, geopolitical tensions had pushed oil prices higher earlier in the week after a missile that struck Poland was widely speculated to have come from Russia. This raised alarm about the escalation of war between Russia and Ukraine, which could further hit global oil supply. Recent reports suggest, though, that it wasn't a Russian strike but possibly a stray air defense missile from Ukraine.

Now what

It's typical for oil stocks to fumble on days of falling crude oil prices. Today was one such day, and unsurprisingly, upstream stocks like Chevron that depend heavily on oil prices for profits bore the biggest brunt.

There's no reason for investors to panic,though. Volatility is inherent in the oil and gas markets, but Chevron is well equipped to ride any storms. The company is making a lot of money at current oil prices and will likely put it to good use by gifting shareholders with a big dividend hike in early 2023.