Oil Falls More Than 7% on Mediation Hopes and Fears Washington-Tehran Deal Could Falter

Key Facts

Oil prices fell more than 7% on Monday, November 2, as hopes grew that talks between Iran and Qatar could lead to an end to the U.S.-Israeli war on Iran and stabilize Middle Eastern supplies. Brent futures fell 7.47% to $104.96 a barrel at 12:24 p.m. Eastern time, after touching a session low of $104.49. U.S. West Texas Intermediate crude dropped 7.2% to $96.62, after reaching $96.44. The move came as shipping through the Strait of Hormuz was disrupted and inventories were being drawn down, making any diplomatic progress a factor in supply expectations. But hopes for de-escalation ran up against talks that produced no breakthrough and Iranian doubts about the prospects for a deal.

Iranian and Qatari officials held talks in pursuit of an agreement to end the war and pave the way for stable oil flows from the region. Reuters reported that a draft proposal was circulating, with a follow-up meeting possible. The Iranian president said the supreme leader had given the government "certain authorities" over peace talks. Masoud Pezeshkian added that Tehran "will try to resolve the issue through dialogue." The remarks point to a willingness to continue the political track, while details of the proposal remained under discussion among the parties and mediators.

Iran's foreign minister said contacts with the United States were continuing through mediators, but described the matter as complex. Reuters reported that Iran's talks with Qatari mediators ended with amended proposals and no breakthrough. The minister said: "I can say that the dialogues are continuing, but the matter is complex." By contrast, Iranian sources told Reuters they believed a new U.S. attack was more likely than an agreement. The gap between continuing contacts and expectations of escalation sets a limit on the bet that oil's sharp decline reflects an imminent settlement.

Iran's plan includes ending the U.S. blockade of Iranian ports, reopening the Strait of Hormuz, securing a U.S. exemption for Iranian oil sales and lifting new sanctions before moving on to other issues. Tehran said discussion of the nuclear file would come after verifying that its conditions had been met. That makes the strait a direct focus of negotiations, as disruption to shipping there has halted trade and depleted global inventories. Sultan Al Jaber estimated that the world had drawn down about one billion barrels from inventories since shipping was disrupted. On regional supplies, Saudi crude exports rose in October from September, according to two of three ship-tracking firms, despite Houthi attacks on Saudi energy infrastructure.

EL7 data showed Brent closing at $104.33 a barrel on November 2, compared with $113.43 on October 30. West Texas Intermediate settled at $96.46, versus $104.12 in the previous session. Brent futures had ended October at their highest level in six months, amid concerns that the Middle East conflict could escalate after the U.S. midterm elections. In U.S. stock markets, the Nasdaq Composite fell 1.1% to 25,164.32 points, and the Russell 2000 declined 0.2% to 2,805.88 points. The stock moves came in a session when oil fell, while the political path and supply remained central market concerns.

Attention is turning to further rounds of talks this week, after Qatari mediators held two rounds with Iranian officials last week, according to regional officials cited by the Associated Press. The mediators are seeking a framework under which Iran would halt its attacks in the Strait of Hormuz in exchange for the United States lifting its blockade of Iranian ports. Iran said it had a two-day plan to reopen the strait and resume nuclear talks if Washington met its demands, after previously saying it would carry out the plan within a week. China is set to send a special envoy to Iran, Oman and Saudi Arabia in early to mid-November in an effort to ease tensions. The U.S. Energy Information Administration's weekly report, covering data for the week ended November 6, is due on November 12 at 12 p.m. Eastern time; Goldman Sachs warns Brent could rise to $140 in 2027 if the Gulf supply shortfall continues.