Oil prices fell by nearly 7% on Monday following diplomatic signals from Washington and Tehran. Brent crude dropped by $7.85 to $105.60 per barrel, while West Texas Intermediate (WTI) fell by $7.20 to $96.92.
Tehran's Diplomatic Decisions
The President of Iran, Masoud Pezeshkian, announced that the Supreme Leader has granted the government "special authorities" for peace negotiations and that Tehran "will try to resolve the issue through dialogue." Iran's Foreign Minister, Abbas Araghchi, also added that negotiators in Qatar are working on a proposal that could reopen the Strait of Hormuz in less than two days if a series of conditions are met.
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Tehran's Conditions for Dialogue
Abbas Araghchi stated that Tehran demands an end to the U.S. maritime blockade on its ports, the lifting of oil sanctions, and a cessation of hostilities across all regional fronts, but is currently not engaging in direct talks with the United States. Meanwhile, U.S. Secretary of State Marco Rubio stated that no decision has yet been made regarding new attacks and President Trump is seeking a diplomatic solution.
At the same time, Israeli Prime Minister Benjamin Netanyahu has urged Trump to quickly resume attacks after the midterm elections on Tuesday. In response to the question of whether he would return to war this week, Trump said, "Let me say, if I do that, will I tell you?"
Traders had concerns about escalating tensions after the elections, and Brent crude prices reached $118 in October. According to Goldman Sachs estimates, geopolitical risks alone account for about $27 of this price increase. Goldman Sachs raised its forecast for Brent crude prices in December from $90 to $105 and expects the average Brent price to reach $88 by 2027.
The UK Maritime Trade Operations Center also reported that a project struck a vessel in the Strait of Hormuz on Sunday, while last week, the Houthis claimed to have carried out new attacks on Saudi refineries in Ras Tanura and Rabigh and Aramco facilities in Abqaiq, which Saudi Arabia has not confirmed. Meanwhile, seven OPEC producers, including Saudi Arabia and Russia, agreed on Sunday to maintain December production targets unchanged.
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