Oil Prices Fall More Than 3% as US-Iran Talks Raise Hopes of Diplomatic Progress

Oil prices fell more than 3 per cent on Monday as investors assessed the prospects of a diplomatic agreement to end the US-Israeli war on Iran following three consecutive days of talks involving Iranian and Qatari officials.

Brent crude futures dropped $3.68, or 3.2 per cent, to $109.75 a barrel by 7:07am Saudi time. US West Texas Intermediate crude declined $3.43, or 3.3 per cent, to $100.69 a barrel.

The decline followed a strong rise in prices during October, when Brent ended the month at its highest level in six months amid concerns that the conflict could intensify after Tuesday’s US midterm elections.

Tim Waterer, chief market analyst at KCM Trade, said the market was experiencing a technical correction after last week’s gains.

He said hopes of diplomatic progress and the absence of significant military escalation over the weekend had eased some immediate pressure on prices.

However, Waterer warned that renewed tensions over Iran could push Brent crude towards $120 a barrel after the midterm elections, depending on developments between Washington and Tehran.

Iranian Foreign Minister Abbas Araqchi said on Sunday that the ongoing discussions were intended to continue consultations with Qatari mediators. He described the talks as progressing and said Tehran remained prepared for both defence and diplomacy.

The diplomatic efforts are taking place against a backdrop of continuing security concerns around the Strait of Hormuz, a critical route for global energy shipments. Recent attacks on oil tankers passing through the waterway have increased shipping and energy costs, adding uncertainty to the market.

Saudi Arabia increased its crude exports in October compared with September despite attacks by Yemen’s Iran-aligned Houthi movement on its energy infrastructure, according to two of three ship-tracking companies.

ING analysts said recent oil price movements reflected growing concern among investors about the possibility of further hostilities between the United States and Iran.

The analysts said the market would be watching whether the midterm elections passed without military strikes or a diplomatic agreement. Such an outcome could determine whether the geopolitical risk premium built into oil prices remained elevated or gradually declined.

Meanwhile, the Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed on Sunday to maintain December production targets at existing levels.

The decision was widely expected and indicates that the group does not anticipate further changes to its production policy until next year. OPEC+ continues to face difficulties with oil exports because of disruptions linked to the conflict.

With diplomatic discussions continuing and shipping security concerns unresolved, traders remain focused on developments in the Middle East for indications of the direction of crude prices.