Brent Drops as Hormuz Flows and Iran Talks Improve

Brent crude fell below $115 a barrel on Tuesday, following a 0.8% loss on Monday, as renewed diplomatic efforts raised hopes of ending the US-Iran war and easing pressure on energy markets. Iran’s Supreme Leader Mojtaba Khamenei called for an end to the current state of “neither war nor peace,” signaling a possible opening for negotiations. Officials from Saudi Arabia, Pakistan and Turkey met in Tehran on Monday and agreed to continue discussions, while Russian President Vladimir Putin was expected to meet Iran’s President Masoud Pezeshkian and Qatar’s emir in Moscow. These developments improved prospects for de-escalation, although significant risks remain. A Saudi-led coalition reported intercepting drones and ballistic missiles launched by Iran-backed Houthi rebels, while Hezbollah was reportedly preparing for renewed conflict in Lebanon. Investors are also monitoring upcoming elections, including in Israel, for potential implications for regional stability and oil supply.

Brent crude held above $116 per barrel on Tuesday, hovering at the highest since June 2022, as investors weighed renewed diplomatic efforts in the Middle East to prevent a wider escalation of the US-Iran conflict. Reports said senior officials from Saudi Arabia, Pakistan, and Turkey met with top Iranian officials on Monday to ease tensions and revive negotiations aimed at avoiding another wave of US-Israeli strikes against Iran. The discussions come roughly a week before the US midterm elections, after which President Donald Trump has repeatedly suggested that military strikes against Iran could resume following months of stalled negotiations. Meanwhile, Saudi-led forces continue to engage Iran-backed Houthi rebels, while Hezbollah is reportedly preparing for another regional conflict in Lebanon after receiving financial support from Iran. These ongoing tensions continue to pose risks to Middle Eastern oil supplies, despite crude flows having recovered to around prewar levels.

Brent crude fell to around $115 a barrel on Monday as Saudi Arabia’s defense minister held talks with Iranian leaders in Tehran to ease bilateral tensions. Prince Khalid bin Salman met with Iranian President Masoud Pezeshkian and Supreme National Security Council Secretary Mohsen Rezaei, alongside Pakistan’s army chief Asim Munir and Turkish intelligence chief Ibrahim Kalin. The talks came as Iran-aligned Houthi militants in Yemen repeatedly attacked Saudi Arabia in recent weeks. The ongoing hostilities have some investors worried about the risk of another major disruption to production, refining or export facilities. Meanwhile, the US authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve on Friday to address a supply disruption at a Louisiana refinery. However, prospects for additional US production remain uncertain, as companies remain reluctant to make major investments amid price volatility and geopolitical risks.