Oil Prices Slide as Traders Bet on Iran Diplomacy

Oil futures eased at the start of the week as market participants reacted to growing hopes that diplomacy could reduce the risk of a wider Middle East war despite limited signs of willingness to negotiate from the parties involved. Traders were looking ahead to a United Nations meeting this week and trimmed a portion of the risk premium that had been built into prices amid the conflict. Brent crude was trading near $102.05 per barrel and US West Texas Intermediate around $98.50 per barrel at the time of the report. The move occurred even as tensions persisted over the weekend: Reuters cited exchanges of threats between Washington and Tehran, with the US president warning of economic collapse and potential regime failure and Iran warning of a severe response to any US attack. Separately, the Yemeni Houthi movement intensified strikes on Saudi Arabia over the weekend, including attacks on targets in Riyadh. Such an escalation would normally support higher oil prices because it expands conflict risk around two major oil chokepoints, but market sentiment favored the possibility of de‑escalation this week. Analysts noted the volatility of sentiment. Tim Waterer, chief market analyst at KCM Trade, told Reuters that markets appear to be removing some risk premium in anticipation of diplomatic progress, while cautioning that whether those hopes are justified remains uncertain. On the supply side, JP Morgan reported that Saudi Arabia has been able to reroute flows to maintain exports through the Strait of Hormuz at roughly 2.9 million barrels per day over the past week, up from about 700,000 barrels per day in August, a development that may have helped ease concern about immediate supply shortages.