Oil prices fell on Monday after surging last week to near six-month highs, as investors seized on signs that hostilities between the United States and Iran might ease. The move was small and the mood cautious. US West Texas Intermediate futures were down $1.76, or 1.7%, at $101.51 a barrel by 0744 GMT, while Brent crude was down $1.49, or 1.28%, at $115.23. Those levels show how far the market remains from normal: even after a decline, benchmark prices are far above where they stood before the war, and most analysts quoted in market reports see the pullback as a pause in a still-tense situation. The question is whether diplomacy can change that picture or whether the supply risks are too deeply embedded.
The background to Monday’s fall is a volatile week. On Friday, prices settled nearly $3 higher after Houthi attacks on Saudi Arabia raised fresh concerns about energy supplies. Brent finished the week up 6% and WTI up 2.3%. The rally was driven mainly by fears of renewed military hostilities in the Middle East, as one analyst put it.
The change on Monday came from the diplomatic side. Qatari mediators travelled to Tehran on Sunday as part of an effort to de-escalate regional tensions in coordination with the United States, according to an official briefed on the situation. In addition, senior officials from the Mecca Pact countries, Saudi Arabia, Turkey and Pakistan, were due to meet Iran’s leaders in Tehran on Monday. This is their first high-level contact since attacks by the Iran-backed Houthis on Saudi Arabia became a pressure point in the wider conflict.
Both developments matter because they involve parties that have a direct stake. Qatar has served as a mediator in past regional disputes, and the participation of Saudi Arabia, the main target of the recent attacks, in direct talks with Tehran suggests a wish to limit the conflict. Markets reacted by trimming the risk premium that built up during the previous week.
Specialists were quick to warn against reading too much into the decline. Vandana Hari, founder of Vanda Insights, said that concerns over renewed military hostilities, which drove much of last week’s rally, “have eased this morning, but the reprieve may prove temporary.” Her reasoning combined politics and timing. President Donald Trump, she said, has not dispelled market expectations that strikes on Iran could still follow after the 3 November midterm elections. “We therefore expect volatility to remain elevated, with risks still skewed to the upside,” she added.
This introduces a calendar element. The market is pricing not just the current stalemate but the possibility that the political calendar in Washington shapes decisions on military action. If investors believe that action is being deferred until after the vote, the period around 3 November could become a source of renewed volatility whichever way it goes.
The attacks themselves did not pause for the talks. Over the weekend the Houthis said they had struck pumping stations on Saudi Arabia’s East-West crude oil pipeline and Riyadh airport, and Saudi Arabia said on Sunday it had intercepted more missiles and drones. The East-West pipeline is significant: it carries crude across the kingdom to the Red Sea coast, offering an outlet that bypasses the Strait of Hormuz. Attacks on it therefore threaten the very alternative route that reduces the world’s dependence on the Gulf chokepoint.
Priyanka Sachdeva, head of market insight at Phillip Nova, made the key analytical point. “While supply risks surrounding the Strait of Hormuz remain firmly entrenched, the current pullback appears more reflective of position adjustments and risk management rather than any meaningful improvement in the underlying supply situation,” she said. In other words, Monday’s fall reflects traders reducing exposure after a strong week, not a recovery in physical supply.
The wider picture is that the US-Israeli war on Iran, which began on 28 February, is still affecting global energy. Companies continue to adjust to disruptions to commercial shipping through the Strait of Hormuz and the Bab el-Mandeb Strait, which the conflict has caused. Two of the world’s most important oil chokepoints are therefore under pressure at the same time.
Industry decisions show that participants are planning for a prolonged period of disruption. On Monday, the energy ministers of Saudi Arabia and Singapore said that state-owned Saudi Aramco will start storing crude oil in Singapore from the second half of 2027, to strengthen the resilience of its supply chain in the region. Holding stocks closer to Asian customers reduces dependence on long voyages through risky waters, and it implies that Aramco does not expect normal conditions to return quickly.
Fatih Birol, head of the International Energy Agency, said at an industry event in Singapore that he does not expect energy markets in 2027 to return to where they were before the Iran war. That is a notable statement from the agency that monitors global oil security. It suggests that the disruption is being treated not as a short episode but as a lasting change in how risks, costs and supply chains are structured.
Two features of the price data deserve attention. First, the level: Brent above $115 and WTI above $100 means that oil remains roughly where it was when earlier analysis described hundred-dollar crude as hard to leave behind. The market’s behaviour over recent weeks, with sharp rises on fresh attacks and modest declines on diplomatic news, suggests an asymmetry: bad news moves prices more than good news. That fits the analysts’ view that risks are skewed upward.
Second, the gap between the two benchmarks. Brent is about $14 above WTI, a wide spread that reflects the premium placed on oil that must travel by sea to reach consumers outside North America. Brent is the reference for seaborne crude, which is exposed to the shipping disruptions, while WTI is more tied to US inland supply. The size of the gap is consistent with the idea that the crisis is mainly a problem of delivery and risk, and less one of production.
For prices to fall durably, several things would have to occur. The first is a credible de-escalation, which would require the mediation efforts to produce a framework that the United States and Iran both accept. The second is a halt to the Houthi attacks on Saudi infrastructure, since these threaten both the pipeline and the shipping lanes. The third is a return to normal conditions in shipping through Hormuz and the Red Sea route, which would lower transit and insurance costs. The fourth is a rebuilding of inventories, which have been drawn down by the war. For prices to rise, the reverse would be needed: a collapse of the talks, a significant strike on infrastructure, or a US military action after the midterms. Because the second set of events is easier to imagine than the first in the short term, the analysts’ warning about upside risk is understandable.
Monday’s decline shows that the oil market is sensitive to diplomacy, but it also shows how limited that sensitivity is. Prices are reacting to hopes, while the physical constraints that keep them high, attacks on infrastructure, disrupted shipping lanes and depleted stocks, are unchanged. The coming days, including the Tehran talks and the run-up to the 3 November election, will test whether the mediation can turn a temporary reprieve into something lasting. Until then, the sensible reading is the one given by the specialists: a market that has stepped back from a peak, but not one that has found a new floor.
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