The price of Brent crude oil, one of the global benchmark indices, fell by more than 6% to $110 per barrel on Monday morning. This price drop occurred as diplomatic efforts to reduce tensions with Iran intensified. Additionally, West Texas Intermediate oil also decreased by about 2% to $101.5 per barrel.
Oil Market Developments and Influencing Factors
The closing price of Brent oil on Friday was $117.4, the highest level since March 19, and only 2% away from the peak of $119.5 in early March. Before the onset of the conflicts, the price of Brent was around $72 per barrel. This price increase was due to attacks by Houthi rebels from Yemen on Saudi Arabia's energy facilities, the world's largest oil exporter.
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However, the market atmosphere changed over the weekend. Reports indicate that Qatari mediators traveled to Tehran on Sunday, and security officials from Saudi Arabia, Pakistan, and Turkey were also expected to visit Iran for security talks. Donald Trump, the President of the United States, publicly described the situation as a choice, stating: "Should I make a deal with them or finish their work?"
Supply Risks and Oil Export Status
Supply risks remain. The Houthis have announced that they targeted Saudi airports and energy facilities again over the weekend. Trump also referred to the increased oil passage through the Strait of Hormuz, claiming that the oil leaving the strait is now more than the pre-war levels.
According to ship-tracking company Clipper, crude oil exports from Gulf countries (excluding Iran) returned to pre-war levels in September, but now about 40% of these exports are conducted through pipelines without passing through the Strait of Hormuz. Previously, this share was about 17% before the conflict.
This week, investors are preparing for important decisions from central banks. The Federal Reserve is expected to keep interest rates in the range of 3.75 to 4 percent on Wednesday. Additionally, the European Central Bank and the Bank of Japan will also make decisions in the coming days.
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