Oil prices dropped on Monday, November 2, as traders weighed the potential for renewed U.S. strikes on Iran against signs of diplomatic progress, just a day before the U.S. midterm elections. The shift came after U.S. President Donald Trump told Israeli Prime Minister Benjamin Netanyahu that he favored diplomacy, a stance that reportedly concerned Netanyahu, according to Axios. Brent crude fell below $112 a barrel, trading at $111.82 in early Asian hours, after a more than 2% jump on Friday. West Texas Intermediate (WTI) for December delivery declined 1.7% to $102.34 a barrel.
U.S. Secretary of State Marco Rubio stated that Washington had made no decision on fresh strikes and that Trump prefers a diplomatic resolution to the eight-month conflict. Trump had previously indicated that peace talks were underway but had also threatened to resume strikes on Iran after the midterms. The Wall Street Journal reported that a top commander briefed Trump on military options on Thursday. However, Trump warned that the U.S. military could destroy Iran's remaining nuclear facilities within 10 minutes, claiming that much of the country's nuclear and military capabilities had already been weakened.
Meanwhile, Iran's Supreme Leader Mojtaba Khamenei ordered senior military commanders to prepare for renewed confrontation with the U.S. and Israel, even as Iran's top diplomat suggested progress in the talks. The UK Maritime Trade Operations (UKMTO) reported a ship struck by a projectile in the Hormuz Strait, following Friday's attack on a liquefied natural gas tanker. Vessels have been navigating the waterway with their transponders off to avoid detection. Despite these tensions, seven OPEC+ members agreed to keep output quotas unchanged for December, after unwinding the last of their voluntary cuts in September.
Gulf states expressed concern that another U.S.-Israeli attack on Iran could trigger a more destructive regional war. UAE presidential diplomatic adviser Anwar Gargash stated at the IISS Manama Dialogue in Bahrain that the Gulf had been drawn into a crisis it had worked hard to prevent through diplomacy. The region is seeking a political solution, according to a Bloomberg report. Iran has already fired thousands of missiles and drones at Gulf states since the conflict began in February, disrupting regional economies and causing civilian casualties. The International Monetary Fund expects Saudi Arabia's economy to shrink 3.3% this year, with steeper contractions forecast for Kuwait and Qatar.