Oil Prices Plummet on Hopes for Diplomatic Resolution to Iran War

Oil prices plummeted more than 5% on Tuesday after US officials suggested progress in talks to resolve the Iran war, potentially easing geopolitical tensions and improving oil flows through the Strait of Hormuz.

Brent crude futures fell $4.41, or 5.3%, to settle at $79.36 a barrel, its lowest level since July 13. US West Texas Intermediate futures settled down $4.57, or 5.7%, at $75.77 a barrel, also reaching a three-week low.

The comments from Qatari and US officials raised hopes for a diplomatic resolution to the conflict, which has disrupted oil flows through the strait. The prospect of a deal has helped remove some of the geopolitical risk premium in oil prices, according to Simon-Peter Massabni, head of business development at XS.com.

However, Goldman Sachs expects Brent crude to trade in a range of $80 to $90 per barrel until there is either confirmation of a new US-Iran agreement or a significant escalation in attacks and targets.