Oil prices fell nearly 2% on Monday, as fresh diplomatic efforts to ease the US-Iran conflict offered some relief after last week’s surge. But another flare-up in Middle Eastern shipping could quickly reverse the decline.
Brent crude dropped $2.21 to $114.51 a barrel by 04:26 GMT, while US West Texas Intermediate slipped 2.16% to $101.04. Brent had gained about 6% the previous week as attacks on Saudi Arabia heightened fears for regional energy supplies.
The retreat has left traders confronting two very different outcomes: a steady rebuilding of inventories or a fresh disruption capable of pushing Brent towards $120.
Oil prices today: Why the retreat towards $114 may not last
Qatari mediators travelled to Tehran on Sunday in an attempt to reduce tensions with Washington. The diplomatic opening encouraged traders to trim some of the premium attached to possible supply interruptions.
Yet the security picture remains unsettled. The Iran-aligned Houthis said they had attacked Saudi airport and oil facilities over the weekend, while Saudi authorities reported intercepting further missiles and drones.
Vanda Insights warned that shipping workarounds were becoming increasingly vulnerable to new attacks. It placed Brent in a $110–$120 trading range, with risks tilted upwards near $114.
That leaves a narrow margin for disappointment if talks fail to deliver a meaningful reduction in hostilities.
Why Goldman Sachs sees a path to $120 oil
Goldman Sachs outlined a $120-a-barrel scenario in September if attacks on Middle Eastern shipping intensified. That was an escalation case, rather than the bank’s central price forecast.
The mechanism is straightforward, as attacks on vessels or export facilities could restrict available cargoes, raise insurance and freight costs, and force refiners to compete for barrels before supplies actually disappear.
On the Goldman Sachs Exchanges podcast published on 23 October, commodities research co-head Daan Struyven said refiners were buying ahead of possible shortages, while investors were using oil to protect portfolios against rising energy prices.
He also highlighted an imbalance beneath the crude recovery. Persian Gulf crude exports were running above their 2025 average, but refined-product exports, including diesel and petrol, remained at about 40% of last year’s levels.
That leaves fuel markets especially vulnerable, even if headline crude shipments continue recovering.
Recovering supplies offer a bearish counterargument
There is also a reason crude has retreated from Friday’s $116.72 settlement.
Vivek Dhar of Commonwealth Bank of Australia said in comments reported by The Wall Street Journal on Monday that Middle Eastern oil flows had recovered towards prewar levels, easing the immediate threat of inventory depletion.
Continued shipments could allow crude and fuel stocks to rebuild. Goldman’s latest base case likewise sees Brent at $90 by year-end, well below its earlier $120 escalation scenario.
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