- Oil’s geopolitical premium is draining. Brent crude hit a low of $89.03 a barrel Tuesday, a level not seen since Aug. 31, before trading down 2.1% at $90.68, while U.S. WTI crude fell 1.6% to $85.45, CNBC reported.
- Trump’s comments set off the move. “We’re seeing momentum toward the end of this conflict. I think it’s going to be ending fairly soon,” Trump said Monday at the White House after meeting Qatar’s prime minister, adding that Tehran was “talking very politely” with Washington.
- Supply is coming back. Crude flows through the Strait of Hormuz have largely recovered, and ING strategists said reports that Iran may soften its position on control of the strait have reduced concerns over a prolonged disruption.
- Not everyone buys a peace deal. FGE chairman Fereidun Fesharaki told CNBC “the difference between the two sides is so wide, it cannot be bridged,” citing U.S. demands that Iran’s enriched nuclear material be moved out of the country.
What Happened?
Brent, the price gauge for around 80% of global crude, briefly fell below $90 a barrel as hopes grew for an end to Washington’s nearly nine-month conflict with Iran. The benchmark started the year around $60 before soaring as high as $130 in March and April as military strikes escalated; Tuesday’s low is about 32% below that peak by our calculation. The U.S. has largely held back on military strikes since September, though it carried out what Trump called “minor strikes” after reports that two missiles hit Iran’s Qeshm Island near the Strait of Hormuz. Trump and Vice President JD Vance have both acknowledged that public disapproval of the war and high energy prices played a role in the Republicans’ midterm losses last week.
Why It Matters?
Lower crude prices offer relief to U.S. consumers and to the Federal Reserve, which is weighing rate hikes as inflation stays above target; the October CPI still showed the energy index up 0.7%. But the drop has not fixed every pain point: a shortage of refining capacity, worsened by Houthi attacks on Saudi Arabia and the Russia-Ukraine war, has kept diesel, gasoline and jet fuel prices elevated. “For now, the return of more Gulf barrels and the prospect of easing tensions are taking some of the geopolitical premium out of crude,” ING said, while warning that prices will remain sensitive to Middle East developments.
What’s Next?
Investors will watch for concrete progress in U.S.-Iran talks, particularly on Hormuz and nuclear material, which Fesharaki called the two sticking points. He said Trump must either “declare victory and walk away” or go to war, with only about a two-week window for any new military action. Any renewed strikes could revive the risk premium, while a breakthrough could extend the slide.
