Oil slides to 10-week low as Trump calls new Iran strikes unlikely

What happened

The Financial Times (FT) reported that oil prices touched a 10-week low on Monday, with Brent crude adding to the losses it suffered after the Republicans' midterm defeat. In an interview with CNN on Sunday, Trump said he was unlikely to resume the war with Iran as long as negotiations on Tehran's nuclear program and on reopening the Strait of Hormuz keep moving forward. By mid-afternoon in the UAE, Brent was trading 3.55% lower at $94.83 a barrel and US West Texas Intermediate (WTI) was down 2.93% at $88.17, according to The National. Those figures are intraday, not closing prices. Qatar's prime minister was expected at the White House later on Monday.

What it means

Oil prices in a war carry a so-called risk premium, an extra amount traders pay as insurance against supplies being cut off. Before the conflict started on February 28, roughly a fifth of the world's oil and liquefied natural gas shipments passed through the Strait of Hormuz, so any hint that fighting will stop pulls that premium out quickly. Brent lost 16% last week, its sharpest weekly fall since the start of the COVID-19 pandemic, according to Reuters reporting carried by Yahoo Finance and Offshore Technology. Monday's slide extended that move.

Trump's comments mark a shift in tone. He had earlier hinted that strikes could restart after the midterm elections, though no large-scale US operation followed. On CNN he said Iran was struggling financially and had been hit hard militarily, adding that renewed attacks were highly unlikely provided talks progress. Analysts quoted by The National said that remark sped up the unwinding of the war premium, and one suggested Brent could drift toward $90 to $95 if de-escalation holds.

The diplomacy itself looks far from settled. Secretary of State Marco Rubio told reporters on Sunday that the two sides remain far apart and that recent talks had not been very productive, calling some Iranian demands unrealistic, CNBC reported. Iran's Foreign Ministry said Tehran wants US sanctions lifted and the war ended on all fronts before negotiations begin. That gap is why some analysts think the market may be getting ahead of itself.

Physical supply risks have not gone away either. Iran's Revolutionary Guard said three tankers exploded and caught fire in the strait on Sunday after using what it called unauthorized routes. In Iraq, a drone strike on an LPG storage tank halted output at the Khor Mor gas field, and Houthi forces claimed new attacks in Riyadh, including on Saudi Aramco sites. Any disruption to Saudi production could push prices back up.

The bull case

For consumers and fuel-hungry businesses, cheaper crude is welcome news. If the White House meeting with Qatar's prime minister moves talks forward and shipping through Hormuz starts to normalize, more of the war premium could disappear. An analyst at Equiti Group sees room for Brent to fall toward the $90 to $95 range in a sustained de-escalation, which would ease pressure on gasoline, diesel and jet fuel costs.

The bear case

The market may be pricing in peace that has not arrived. Rubio described the negotiations as stalled, Iran has set preconditions Washington has resisted, and tankers are still being attacked in the strait. SS WealthStreet's Sugandha Sachdeva said crude is likely to keep a geopolitical premium unless a real breakthrough comes with normal shipping flows. Fresh strikes on Gulf energy sites could quickly reverse Monday's drop.