Oil prices fall 1% as US-Iran peace hopes ease supply concerns

Global oil prices fell by around 1% on Tuesday as renewed diplomatic efforts to resolve the US-Israeli war on Iran raised

Global oil prices fell by around 1% on Tuesday as renewed diplomatic efforts to resolve the US-Israeli war on Iran raised hopes of easing tensions in the Middle East. However, fresh attacks by Iran-aligned Houthi forces on Saudi Arabia continued to threaten regional stability and energy supplies.

Brent crude futures declined by $1, or 0.86%, to $114.81 per barrel. US West Texas Intermediate (WTI) crude fell 88 cents, also down 0.86%, to $100.88 per barrel. Both benchmarks had dropped by around 1% earlier in the trading session.

Diplomatic efforts gathered pace on Monday when Saudi Arabia, Türkiye and Pakistan held talks with Iranian officials in Tehran to ease regional tensions. Iranian state media reported that the four countries had agreed to continue discussions aimed at strengthening cooperation on peace and security.

Market analysts said the latest diplomatic engagement had encouraged investors to take profits after oil prices climbed to multi-month highs. Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet, said hopes of progress in negotiations between Washington and Tehran had contributed to the decline in crude prices.

Despite Tuesday’s losses, oil prices remained elevated amid continuing geopolitical uncertainty. Brent crude surged above $117 per barrel last week, reaching its highest level since April, following a series of Iranian attacks on tankers near the Strait of Hormuz. Prices also touched the $117 mark on Monday.

The outlook for regional peace remained uncertain after renewed attacks by Iran-aligned Houthi forces targeted Saudi Arabia, one of the world’s major oil producers. The developments have heightened concerns about the security of energy infrastructure and commercial shipping routes across the Gulf.

The Strait of Hormuz has become a major focal point of the conflict. Before the war began in February, the narrow waterway carried approximately one-fifth of global energy supplies. Disruptions to shipping through the passage have raised concerns about the availability and transportation of crude oil and other petroleum products.

Data from a Washington-based think tank indicated that October had recorded the highest number of attacks on commercial shipping in the Strait of Hormuz and nearby waterways among the maritime security incidents it had tracked since 2017.

ANZ Research also warned that the oil market remained vulnerable to pressure on supplies, transportation networks, inventories and refining operations.

Gulf crude exports declined for a fourth consecutive week, while oil flows through the Strait of Hormuz remained at around 60% of their normal levels, according to the research note.

Meanwhile, global inventories of distillate fuels, including diesel and heating oil, stood nearly 5% below their five-year average. The combination of reduced exports, disrupted shipping and lower inventories continues to leave energy markets exposed to further geopolitical shocks.

Although diplomatic efforts have provided some relief to oil markets, continued hostilities and uncertainty over shipping through the Strait of Hormuz could keep crude prices volatile in the coming days.