Oil falls 2.16% to $101.04 as fears of military escalation ease
Key Facts
West Texas Intermediate futures fell $2.23, or 2.16%, to $101.04 a barrel on October 26, while Brent contracts dropped $2.21, or 1.89%, to $114.51. The decline followed gains by both benchmarks in the previous week to levels near six-month highs. Reuters said prices fell amid hopes of easing hostilities between the United States and Iran. The report said fears of renewed military operations in the Middle East had eased on Monday morning. But the easing in fears did not end concerns about the course of regional tensions.
The previous week's gains were substantial: Brent ended the week up 6%, while WTI rose 2.3%. Vandana Hari, founder of Vanda Insights, attributed much of oil's rise to fears of renewed military action in the Middle East. She said those fears had "eased this morning, but the reprieve may be temporary." The daily decline puts prices in the context of a weekly rally that Monday's losses did not erase. It also reflects a gap between a temporary improvement in political expectations and continued supply risks linked to attacks in the region.
In an effort to ease tensions, Qatari mediators traveled to Tehran on Sunday as part of coordinated efforts with the United States, according to an official briefed on the matter cited in a Reuters report. The move raised hopes of containing the escalation, putting pressure on prices after the previous week's rise. Still, Hari said market expectations that strikes on Iran could follow the U.S. midterm elections had not faded. She identified the November 3 election as a date that could remain in investors' assessment of the crisis. She added that volatility would remain high, with risks tilted to the upside, as the market had not ruled out a return to escalation.
Hopes of easing tensions coincided with continued reports of attacks on Saudi Arabia. Iran-backed Houthis said they targeted an airport and oil facilities in the kingdom on Saturday, while Saudi Arabia said on Sunday it had intercepted more missiles and drones. Separately, the Associated Press reported that King Khalid International Airport in Riyadh reopened Terminals 1 and 2 for domestic and international flights on October 25. A Saudi military spokesman said air defenses intercepted and destroyed a ballistic missile and a drone launched toward Riyadh. These events show security tensions persisting alongside efforts to de-escalate between Washington and Tehran.
The Associated Press reported that Houthi attacks in early October struck an airport complex housing two other terminals, killing 17 people and injuring more than 330. More broadly, the agency said more than 3,000 commercial vessels crossed the Strait of Hormuz with U.S. military support in the six months before October 25. In a sign of tight supply, the International Energy Agency estimated that observed global inventories were about 509 million barrels below pre-war levels at the end of September. The agency said market balances were set to remain in deficit through the end of the year. This backdrop keeps supply risks in focus as prices move in response to political and security news.
The U.S. Energy Information Administration raised its forecast for the average spot price of Brent crude in the fourth quarter of 2026 to $105 a barrel, up $14 from its forecast the previous month. The forecast is based on the assumption that restrictions on oil flows from the Middle East will continue through the quarter. The agency also said attacks on Saudi Arabia's East-West pipeline highlight the potential for actual oil flows and prices to remain volatile. Between the previous week's gains and Monday's decline, the outlook remains tied to two parallel developments: efforts to ease tensions and continued concerns about supply disruption. Markets are watching the November 3 election as a milestone in light of Hari's expectations that strikes on Iran could resume afterward.