Oil prices fell again on Monday after Brent’s steepest weekly decline since the pandemic, amid growing hopes of a US-Iran peace deal.
Brent slipped 0.85% to $97.48 a barrel by 01:38 GMT, while West Texas Intermediate lost 0.35% to $90.51.
Brent dropped roughly 17% last week, even as tanker attacks continued near the Strait of Hormuz.
US President Donald Trump suggested further strikes were unlikely if talks produced a strong agreement. But Iran has not signalled that a settlement is imminent, leaving oil caught between hopes of diplomacy and disruption to shipping.
Why oil is falling on hopes of an Iran deal
The selloff accelerated after Democrats’ victories in US midterm elections raised expectations of political pressure on Washington to de-escalate the conflict.
Brent slumped around 8% on Wednesday alone as traders removed part of the premium attached to Middle Eastern supply disruptions.
In a weekend CNN interview, Trump said another military campaign was highly unlikely if Iran accepted a sufficiently strong agreement. His language appeared more conciliatory, although the promise was conditional and officials have not announced a breakthrough.
KCM Trade analyst Tim Waterer called Trump’s comments “more measured”, but said markets remained unsure whether they signalled a lasting policy change or another shift in tone.
Iranian Foreign Minister Abbas Araghchi said mediation had stalled following the election, underscoring the distance between political hopes and an actual settlement.
Brent settled at $98.32 on Friday, after a modest recovery on shipping threats. Monday’s retreat suggests traders are again assigning greater weight to diplomacy, even before physical supply routes have returned to normal.
Strait of Hormuz attacks challenge the optimism
The shipping picture is less reassuring, as British maritime authorities reported a Sunday projectile strike on an outbound tanker in Hormuz.
Another tanker reported an explosion near the waterline on Friday. It continued sailing, but repeated incidents highlight why insurers, shipowners and refiners cannot plan around a peace deal that has yet to materialise.
Longer voyages, security precautions and transfers between vessels can raise the delivered cost of crude, even when more barrels are available.
Rystad Energy analyst Janiv Shah told Reuters on Friday that the market was moving towards oversupply, but “the quality difference still exists” between grades refiners need and those readily available. He warned failed talks could tighten supplies.
Iraq’s foreign minister said Baghdad had reached an understanding with Washington over exports through a lane near Oman.
Iraqi shipments reached 3.5 million barrels daily in October, but the arrangement does not guarantee safe passage for every tanker.
Could a supply surplus keep Brent under pressure?
Beyond the conflict, supply is outrunning demand. JPMorgan estimated that global supply exceeded demand by 1.1 million barrels a day in September and 1.4 million in October.
Middle Eastern shipments rose to about 20.7 million barrels daily from 9.8 million in March, although flows remained below pre-war levels. Latin American output contributed another 1.5 million barrels a day compared with a year earlier, according to the bank.
Demand has fallen by an estimated 3.3 million barrels daily since the conflict began, reflecting higher fuel prices and disrupted consumption.
That surplus helps explain why Brent may struggle to recover even if tanker attacks persist. Additional barrels cushion disruptions, although renewed fighting could tighten regional supplies.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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