Oil prices fell more than 3% on Monday as investors responded to renewed diplomatic efforts between Iran and Qatar aimed at securing an agreement to end the US-Israeli war on Iran.
Brent crude futures dropped $3.68, or 3.2%, to $109.75 a barrel by 0407 GMT. US West Texas Intermediate (WTI) crude fell $3.43, or 3.3%, to $100.69 a barrel.
The decline followed a strong rally that pushed Brent to its highest level in six months at the end of October, amid concerns that the conflict between Washington and Tehran could escalate again after Tuesday’s US midterm elections.
Diplomatic Talks Ease Immediate Market Concerns
Iranian and Qatari officials held a third consecutive day of talks as part of efforts to secure a diplomatic settlement.
Tim Waterer, chief market analyst at KCM Trade, described the decline as a technical correction following last week’s gains.
“Oil is seeing a technical pullback this morning after last week’s strong gains,” Waterer said.
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He added that hopes of diplomatic progress, combined with the absence of significant military escalation over the weekend, had reduced immediate pressure on prices.
However, Waterer warned that markets remained sensitive to developments involving Iran. He said renewed tensions after the US midterm elections could push Brent crude towards $120 a barrel.
Iranian Foreign Minister Abbas Araqchi said on Sunday that the “ongoing and progressing” discussions aimed to continue consultations with Qatari mediators.
He added that Tehran remained prepared for “both defense and diplomacy”.
Strait of Hormuz Attacks Keep Oil Supply Risks in Focus
Despite the price decline, concerns over energy supplies remained high following attacks on oil tankers travelling through the Strait of Hormuz.
The incidents have increased global energy and shipping costs, highlighting the vulnerability of a major route for international oil trade.
Meanwhile, two of three ship-tracking companies reported that Saudi Arabia increased crude exports in October compared with September, despite attacks by Iran-aligned Yemeni Houthi forces on its energy infrastructure.
The developments have added uncertainty to the global oil market, where traders are closely monitoring both supply disruptions and diplomatic efforts.
Oil Market Awaits US Midterm Election Fallout
Analysts at ING said recent price movements reflected growing concerns that hostilities between the United States and Iran could intensify.
“The price action in oil in recent weeks reflects a market increasingly bracing for the potential for more hostilities between the US and Iran,” the analysts said in a client note.
They added that if the US midterm elections passed without either renewed military strikes or a diplomatic agreement, traders would need to assess whether the geopolitical risk premium built into oil prices would remain or gradually decline.
The outcome of diplomatic discussions and any subsequent military developments could therefore influence oil prices in the coming days.
OPEC+ Keeps December Production Targets Unchanged
Separately, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, kept their December production targets unchanged at Sunday’s meeting.
The decision met market expectations and indicated that the group was unlikely to make further policy adjustments before next year.
OPEC+ continues to face challenges from export disruptions linked to the war involving Iran, adding another layer of uncertainty to the global energy outlook.
Although Monday’s decline eased some immediate pressure on oil prices, continued tensions around the Strait of Hormuz and uncertainty over US-Iran relations remain significant factors for energy markets.
