Oil prices fell after reports indicated that US President Donald Trump plans to give diplomacy more time before deciding on further strikes against Iran. The shift in stance came ahead of the Nov 3 midterm elections, with Brent crude slipping towards US$111 a barrel and West Texas Intermediate nearing US$102. Trump reportedly expressed his preference for diplomacy during a phone call with Israeli Prime Minister Benjamin Netanyahu, a move that reportedly concerned Netanyahu. The two countries had initiated joint attacks on Iran in late February.
US Secretary of State Marco Rubio confirmed on Oct 31 that no decision had been made on fresh strikes, emphasizing Trump's preference for a diplomatic resolution. Despite ongoing attacks on vessels around the Strait of Hormuz, the push for talks eased concerns about renewed hostilities. Brent crude had rallied in October, reaching a six-month high despite a revival of crude flows through Hormuz.
Analysts noted that the price drop was temporary, with Florence Schmit of Rabobank warning that current rhetoric suggests further escalation in the Middle East remains possible. Iran's Supreme Leader Mojtaba Khamenei ordered military preparations for renewed confrontation, even as diplomatic talks progressed. An Iranian delegation was in Qatar for discussions with mediators on Oct 31.
Recent attacks on vessels, including a liquefied natural gas tanker on Oct 30 and a ship struck by a projectile in Hormuz on Nov 1, highlighted ongoing tensions. While crude exports from the Persian Gulf are near prewar levels, oil product shipments remain constrained. The Middle East conflict, along with Ukrainian attacks on Russian refiners, has driven fuel prices higher, particularly diesel in the US and Europe.
Goldman Sachs raised its Brent forecast to US$105 a barrel for December and an average of US$88 in 2027, citing heightened geopolitical supply risks. Analysts warned that conflicts in the Middle East and Ukraine, alongside broader geopolitical fragmentation, create high disruption risks. OPEC+ agreed to keep output quotas unchanged in December, a largely symbolic move given the ongoing threats to exports and production facilities.