Oil Falls More Than 7% on Hopes for Deal to Stabilize Middle East Supply
Key Facts
Oil prices fell more than 7% on Monday, November 2, after talks between Iranian and Qatari officials bolstered hopes of ending the U.S.-Israeli war on Iran and stabilizing crude supplies in the Middle East, Reuters reported. In a snapshot at 12:24 p.m. Eastern Time, Brent futures fell 7.47% to $104.96 a barrel. West Texas Intermediate crude dropped 7.2% to $96.62. The move reflected market bets that diplomatic progress could ease supply disruptions linked to the Strait of Hormuz. But the proposals under discussion had not become an effective agreement, and reopening the strait remained contingent on the negotiations.
The Associated Press said Qatari mediators held two rounds of talks with Iranian officials during the previous week, seeking to establish 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. The efforts coincided with circulation of a draft proposal and the possibility of a follow-up meeting, Reuters reported. Iran's president said the supreme leader had given the government "certain authorities" regarding peace talks. This places the mediation in the context of negotiations over reciprocal steps involving the strait and the blockade, not an announcement of a completed settlement. Reaching an actionable framework would change traders' expectations for crude flows through the region.
Iranian Foreign Minister Abbas Araghchi said a new proposal with mediators could shorten the timeline for fully reopening the Strait of Hormuz to two days, adding that Iranian diplomats were in Qatar for the discussions. According to the Associated Press, Iran presented a two-day plan on November 2 to reopen the strait and resume nuclear talks with the United States if Washington met its demands. Tehran said ships would pass along a route agreed by Iran and Oman, and Foreign Ministry spokesman Esmail Baghaei described the plan as a basis for negotiations with Washington through mediators. The proposed timeline remains part of a conditional plan and does not mean shipping has already resumed. This is directly relevant to the market's sensitivity to any change in arrangements for passage through the strait.
Tehran's earlier conditions point to the complexity of the negotiations. Araghchi said a proposal announced the previous month would have allowed the passage to reopen within a week if the United States agreed to lift its blockade of Iranian ports, release frozen Iranian assets and waive sanctions on oil sales, among other conditions, but it was rejected. The Associated Press reported that the earlier plan included seven conditions, among them lifting the blockade, while Iran's demands also included lifting sanctions on oil sales and a ceasefire that included Lebanon. The latest proposal differs in the timeline it offers for reopening, but remains tied to meeting Tehran's demands. The impact of any announcement on negotiations therefore depends on both sides accepting the conditions and implementation arrangements.
The diplomatic moves follow disruptions on the ground in the strait. The Associated Press reported that Iran's Revolutionary Guard said on October 30 that four oil tankers struck mines and caught fire while passing through, and that one of them was carrying more than two million barrels. Sultan Al Jaber, ADNOC's chief executive, also said the world had drawn down nearly one billion barrels from inventories since the war disrupted shipping through the Strait of Hormuz. The estimate indicates the scale of inventory withdrawals amid shipping disruption, while the tanker incidents showed the risks surrounding passage. Brent ended October at its highest level in six months, as investors feared a fresh escalation of the conflict after the U.S. midterm elections scheduled for Tuesday, Reuters reported.
On the supply front, the seven countries participating in the OPEC+ agreement decided to keep December 2026 production at the required production level for September and announced that their next meeting would be held on November 29, according to the organization. The decision comes as the market tracks the impact of mediation on crude flows and shipping risks. In an estimate reported by Reuters, Brent could rise to $140 a barrel in 2027 if Gulf production remains 3.5 million barrels per day below the 2025 average; that scenario is conditional on the production shortfall continuing and is not a firm forecast. China also said it plans to send a special envoy to Iran, Oman and Saudi Arabia in early to mid-November to ease tensions and promote regional stability. The market is also awaiting inventory data: the American Petroleum Institute's schedule lists a November 3 release for the week ended October 30, with a notice that dates are subject to change; the Energy Information Administration's weekly report is due on November 12 for the week ended November 6.