- Crude eased on diplomacy hopes. Front-month WTI fell 0.5% to $90.37 a barrel and Brent fell 1.0% to $97.37 at 0230 GMT, as investors looked for progress on the Iran war after Democrats’ midterm sweep, WSJ reported, citing ANZ.
- Trump lowered the temperature. He told CNN renewed U.S. strikes on Iran are “highly unlikely” if talks on Tehran’s nuclear program and reopening the Strait of Hormuz produce a strong agreement, CNBC reported.
- But the threat remains. Trump said three U.S. aircraft carriers are in the region, that the U.S. could knock down 38 bridges “in literally one hour,” and reiterated threats to Iranian power plants, while the U.S. naval blockade of Iranian ports continues, per CNBC.
- Tehran is less upbeat. Iranian Foreign Minister Abbas Araghchi said there had been no progress in talks and that Iran is waiting to see whether Washington’s position changes after the midterms, WSJ reported.
What Happened?
Oil prices fell in early Asian trading Monday on rising hopes for easing Middle East tensions, WSJ reported. Front-month WTI was down 0.5% at $90.37 a barrel and Brent down 1.0% at $97.37 at 0230 GMT; ANZ analysts said investors were looking for progress on the Iran war after the Democrats’ sweeping election win. President Trump told CNN that restarting the war is “highly unlikely” as long as talks to constrain Iran’s nuclear program and reopen the Strait of Hormuz make progress, CNBC reported, while warning he could still strike bridges and power plants. Iranian Foreign Minister Abbas Araghchi said there had been no progress and that Tehran is waiting to see whether the U.S. position shifts.
Why It Matters?
The more than eight-month-old war has stoked inflation and sent oil prices surging, CNBC noted, and an end to it and a reopening of Hormuz would likely ease prices. That matters directly for the Fed, which markets still expect to hike in December partly because energy prices remain high. Trump is also likely to face increased pressure to end the conflict now that Democrats control both chambers of Congress, and some Republicans want an end given the role high gasoline prices played in the election.
What’s Next?
Watch for concrete steps in U.S.-Iran talks and any change in Hormuz shipping, which would be the main driver of a further leg lower in crude. Fresh attacks in the region or a breakdown in negotiations would reverse the move, and Tuesday’s CPI report will show how much energy is still feeding into inflation.
