Oil steadies after tumbling 8% on optimism over US-Iran talks

Brent oil steadied after plunging almost 8% in the previous session, with the US and Iran signalling a willingness to pursue peace talks as the war in the Middle East enters its ninth month.

The global benchmark was near $105 a barrel, and West Texas Intermediate was below $97 after its biggest decline in three months on Monday. Iran’s president said his government had been granted more authority by the nation’s supreme leader to negotiate, while US President Donald Trump hinted at progress in talks. Still, simmering hostilities are keeping the market on edge.

The US attacked Iran’s Qeshm Island at the mouth of the Strait of Hormuz on Monday, part of a weeks-long campaign of smaller-scale strikes, the Wall Street Journal reported, citing American officials. State-run Islamic Republic News Agency reported five explosions on the island.

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“It doesn’t make a lot of sense given how high tension levels are to see price drops” like Monday’s, said Karen Young, senior research scholar in the faculty of International and Public Affairs at Columbia University. “But the news cycle is generating movement, and that will mean it has further to spike if we get to more active US-Israeli kinetic attacks on Iran.”

Monday’s slide came just before American voters head to the polls for the midterm elections, with Trump and the Republican Party facing mounting political pressure over energy prices that have been driven up by the war. The president has repeatedly said he would resolve the conflict one way or the other, while threatening to resume strikes on Iran after the elections.

Trump mouthed “no” when asked by a reporter if attacks on Iran would resume after the midterms. Throughout the conflict, he has frequently threatened new strikes and claimed progress in diplomacy, without substantial breakthroughs. Oil’s slump rippled across energy markets on Monday, with European gas futures falling almost 9% and US heating oil posting its steepest drop in six months.

The plunge on Monday came after global benchmark Brent rallied almost 14% in October, hitting a six-month high, on concerns about renewed hostilities between the US and Iran, despite a revival in exports from the Persian Gulf.

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Still, the scope for a diplomatic breakthrough is unclear. Iranian President Masoud Pezeshkian did not specify the extent of the authority granted by Supreme Leader Mojtaba Khamenei or whether it signals a broader shift in the country’s red lines in indirect negotiations with the US. His remarks were cited by IRNA.

Major differences between the two sides remain. Tehran wants a US naval blockade of its ports lifted, sanctions eased and frozen assets released before fully reopening the Strait of Hormuz to maritime shipping. Washington is demanding concessions related to Iran’s nuclear program.

Prices:

Brent for January settlement was little changed at $104.77 a barrel at 12:00 p.m. in Singapore after tumbling 7.6% on Monday
WTI for December delivery was 0.2% higher at $96.64 a barrel after plunging 7.4% in the previous session.

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