Brent Falls to $103.44 After Limited US Strikes in Strait of Hormuz
Key Facts
A US official said the United States carried out limited strikes on Iranian targets in the Strait of Hormuz on Tuesday, November 3, and said the strikes targeted Iranians using surface-to-air missiles against the United States in the strait. Iranian media reported hearing explosions on Qeshm and Hengam islands, as well as near Bandar Abbas on the mainland. The development came as prices swung between fears of escalation and signs that diplomatic efforts were continuing. Early in the session, Brent rose to $106.61 a barrel, while West Texas Intermediate climbed to $98.06, according to data at 07:44 GMT. But the gains did not last; both crude benchmarks fell in later trading as part of the risk premium faded.
At 18:18 GMT, Brent was down $1.33, or 1%, at $103.44 a barrel, while WTI fell 56 cents, or 1%, to $95.90. Brent was heading for its lowest close since October 7, while US crude was heading for its lowest close since October 14, according to Reuters. In closing data recorded by EL7, Brent ended the November 3 session at $103.82, compared with $104.77 the previous day. WTI closed at $96.56, versus $96.46 on November 2. These closing levels show a calmer path than the rise recorded in the early hours, when news of the strikes pushed prices higher.
Both crude benchmarks had fallen more than 7% on Monday after Iranian talks with Qatari mediators raised hopes of a settlement to end the war, before those hopes faded. In the following session, the report of the strikes brought some concern back to the market; market analyst Tim Waterer said, "The report added some risk premium to the oil price." Reuters reported that contacts between Tehran and Washington continued after days of Iranian-Qatari talks ended with revised proposals but no breakthrough. Qatar's foreign ministry said the United States and Iran remained committed to mediation efforts and were reviewing proposals aimed at narrowing differences. In contrast, a senior Iranian official told Reuters that the two sides remained far apart on an agreement to end the war, and that Tehran would not accept what he described as Washington's "excessive" demands.
Oil prices' sensitivity to the strait is tied to its scale in global energy trade: about 20 million barrels a day of crude and oil products passed through it in 2025, equivalent to nearly 25% of global seaborne oil trade, according to the International Energy Agency. The agency estimates that available alternative pipelines can reroute between 3.5 and 5.5 million barrels a day of crude flows to bypass the strait. The Associated Press said Iran had offered to reopen the strait and resume nuclear talks if Washington lifted its naval blockade of Iranian ports, exempted oil sales from sanctions, and committed to a ceasefire that included Lebanon. Separately, a Reuters report said Aramco was working to expand a crude pipeline that bypasses the Strait of Hormuz, according to its CEO Amin Nasser. Shipping activity and the terms of negotiations remain among the issues linking geopolitical risks to supply expectations.
On US inventories, analysts estimated that energy companies added 0.9 million barrels to crude stocks in the week ended October 30. If the estimate is borne out, it would be the first inventory increase in five weeks, compared with a rise of 5.2 million barrels in the same week last year. Reuters reported that the market was awaiting the American Petroleum Institute report on Tuesday and the Energy Information Administration report on Wednesday. However, the EIA schedule sets the next rescheduled release for the week ended November 6 for Thursday, November 12, at 12 p.m. Eastern time, because of the Veterans Day holiday. Washington and Tehran continue to review mediation proposals, while the course of the talks remains a factor in the market's assessment of supply risks.