Oil Prices Fall as Trump Signals Pause in Military Action Against Iran

Oil prices declined for a second consecutive session on Tuesday after US President Donald Trump played down the prospect of further military action against Iran, easing concerns about prolonged disruptions to energy supplies from the Middle East.

Brent crude futures fell 70 cents, or 0.75 per cent, to $91.88 a barrel by 5:46am Saudi time. US West Texas Intermediate crude dropped 78 cents, or 0.90 per cent, to $86.07. Both benchmarks had fallen by around 1 per cent earlier in the session.

The decline followed a 5.85 per cent fall in Brent prices on Monday, when the benchmark reached its lowest level since August 31.

Trump said he would hold off on further strikes against Iran for the time being following appeals from regional countries, including Qatar. The Qatari prime minister raised the issue during talks at the White House, according to reports.

In an interview with Reuters and a subsequent appearance at a White House press briefing, Trump said the US would maintain its naval blockade in the Strait of Hormuz despite the decision to pause new military action.

Tim Waterer, chief market analyst at KCM Trade, said investors were responding to Trump’s more conciliatory tone towards Tehran following the US midterm elections.

He noted that attacks on shipping around the Strait of Hormuz were continuing but had not intensified enough to trigger a fresh risk premium in oil prices.

Brent has fallen about 22 per cent from its six-month high of $118 a barrel, reached on October 30. Concerns that Washington could intensify its military campaign against Iran after the midterm elections have eased, although uncertainty over shipping security remains.

Supply figures have also contributed to the market’s movement. A Reuters survey found that OPEC oil production increased in October, supported by higher output from Saudi Arabia, Kuwait and Iraq despite continued restrictions on exports.

Gregory Brew, a senior analyst at Eurasia Group, said Brent prices were unlikely to fall below $90 a barrel without more lasting signs of de-escalation and progress towards an agreement between Washington and Tehran.

He warned that shipping risks remained high as Iran continued to attack vessels travelling through the Strait of Hormuz.

Meanwhile, Russian and Ukrainian officials were due to begin two days of US-brokered talks on Tuesday. The discussions marked their first such meeting since February and followed Trump’s suggestion that a broader peace agreement could be possible in their war, which has lasted four and a half years.

The negotiations are also expected to address European security, adding another diplomatic development to a week in which investors are closely monitoring geopolitical risks and their impact on energy markets.