Middle East — Oil Prices Ease as US-Iran Diplomacy Raises Hopes of De-escalation
Oil prices declined on Monday as investors weighed the possibility of reduced tensions in the Middle East following a sharp rally in crude markets the previous week.
US West Texas Intermediate crude futures fell $1.76, or 1.7%, to $101.51 per barrel by 0744 GMT. Brent crude futures dropped $1.49, or 1.28%, to $115.23 per barrel.
The pullback came after strong gains driven by fears of energy supply disruptions. On Friday, crude prices settled nearly $3 higher following attacks by Yemen’s Houthi movement in Saudi Arabia, which heightened concerns about the security of regional oil infrastructure.
Brent ended the previous week 6% higher, while US West Texas Intermediate advanced 2.3%.
Diplomatic developments provided some relief on Monday. Qatari mediators travelled to Tehran on Sunday as part of efforts to ease regional tensions in coordination with the United States, according to an official briefed on the situation.
Senior officials from Saudi Arabia, Turkey and Pakistan were also scheduled to meet Iranian leaders in Tehran on Monday. The gathering marked their first high-level contact since attacks by Iran-backed Houthis on Saudi Arabia became a pressure point in the broader conflict.
Despite the diplomatic initiatives, traders remained wary of a possible resumption of hostilities.
Vandana Hari, founder of oil market analysis provider Vanda Insights, said concerns about renewed military action in the Middle East had eased at the beginning of the week but cautioned that the relief might not last.
Hari also said US President Donald Trump had not ruled out market expectations that strikes on Iran could still take place after the November 3 midterm elections. She anticipated continued volatility, with risks still skewed toward higher oil prices.
Over the weekend, the Houthis said they had targeted pumping stations along Saudi Arabia’s East-West crude oil pipeline and Riyadh airport. Saudi Arabia reported on Sunday that it had intercepted additional missiles and drones.
The conflict has also affected commercial shipping through the strategically important Strait of Hormuz and Bab el-Mandeb Strait. Both waterways play significant roles in international energy trade, leaving prolonged disruptions as a potential source of further upward pressure on crude prices.
Meanwhile, uncertainty continued to surround the longer-term supply outlook. Saudi Arabia’s state-owned oil company, Saudi Aramco, plans to begin storing crude oil in Singapore in the second half of 2027, according to statements made by the energy ministers of Saudi Arabia and Singapore on Monday. The initiative is intended to improve the resilience of the company’s regional supply chain.
Priyanka Sachdeva, head of market insight at Phillip Nova, warned that the latest decline in oil prices appeared to stem from shifts in market positioning and risk management rather than a substantial improvement in underlying supply conditions.
Fatih Birol, head of the International Energy Agency, also cautioned at an industry event in Singapore on Monday that energy markets would not return to their pre-war conditions in 2027.
For businesses and investors, falling crude prices provided temporary relief. However, geopolitical uncertainty continued to pose risks to energy costs, shipping operations and inflation expectations.
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