Crude oil prices fell Tuesday for a second consecutive session as markets hoped the U.S. and Iran would reach a diplomatic settlement to a conflict that has disrupted global energy supplies for eight months.
Market Movement and Diplomatic Talks
U.S. West Texas Intermediate futures lost 37 cents to close at $96.09 a barrel after dropping below $95 earlier in the session. Brent crude, the international benchmark, shed $1.17 to settle at $103.60, following rumors that the U.S. and Iran were making progress toward a deal.
Oil sold off more than 7% on Monday after Washington and Tehran signaled they were both open to discussions to reach a settlement. President Donald Trump told reporters that Tehran wants to make a deal and that it could happen.
Qatar is continuing to mediate talks between the U.S. and Iran, the Gulf state’s foreign ministry said Tuesday. A delegation from Qatar held talks in Tehran to reach an agreement that prevents further regional escalation and ends the conflict, the foreign ministry stated.
However, Iran’s Foreign Ministry spokesman Emsaeil Baqaei said Tuesday that Tehran will not accept diplomacy based on coercion, according to state-owned media outlet Islamic Republic News Agency, leaving the actual standing of talks unclear.
Ongoing Conflict and Market Pressures
The market had previously priced in escalation risks following the U.S. midterm elections amid reports that Washington was drafting plans for strikes on Iran, pushing crude prices up by more than 10% in October.
The Middle East situation remains volatile with substantial risks of renewed fighting. U.S. officials told The Wall Street Journal that Washington attacked Iran’s Qeshm Island on Monday and has carried out limited strikes against the country in recent weeks. The military campaign has been kept low-profile to avoid signaling major escalation plans, according to an unnamed official cited in the report.
Commercial ships also continue facing attacks in the Persian Gulf, Strait of Hormuz, and Gulf of Oman, with at least four ship attacks reported since the start of the month according to the United Kingdom Maritime Trade Operations Centre.
Despite these attacks, the Trump administration has promoted a possible diplomatic solution. Vice President JD Vance told CNN that both the president and he feel positive about the prospect of a negotiated settlement. U.S. Secretary of State Marco Rubio stated Sunday that Trump prefers to resolve the Iranian war diplomatically rather than using military force.
High oil prices have contributed significantly to inflation and high gasoline prices in the U.S., becoming a concern for Trump ahead of the midterm elections. Last week, two Federal Reserve presidents stated that interest rates will need to move higher to rein in inflation, which helps bring down price increases but crimps growth and raises consumer costs.
