Brent Rally Pauses on Mideast Diplomatic Efforts

Brent crude paused its rally to settle around $104 a barrel on Friday after Iranian state media said Tehran would meet Gulf states in Oman to discuss the Strait of Hormuz. Gulf Cooperation Council diplomats are expected to meet their Iranian counterpart on Monday to discuss a possible temporary arrangement for managing shipping through the strait. Adding to downward pressure, the EIA raised its 2027 US crude production forecast to 14.3 million barrels a day, while the IEA sharply cut its global oil demand outlook, forecasting a 2.5 million-barrel-a-day contraction in 2026. Meanwhile, China is on track to import roughly the same volume of crude in September as in August, with purchases recovering from June’s decade-low. Saudi Arabia shut its East-West crude pipeline as a precaution after multiple attacks, while Iran-backed Houthis reportedly advanced to Yemen’s Perim Island. Brent surged 9% on the week.

Brent crude fell below $105 a barrel on Friday after Iranian state media reported plans for talks with Gulf states in Oman, suggesting diplomatic efforts are emerging despite a sharp escalation in tensions over the past week. Top diplomats from the six-member Gulf Cooperation Council are expected to meet their Iranian counterpart on Monday to discuss a possible temporary arrangement for managing shipping through the Strait of Hormuz. Meanwhile, the International Energy Agency sharply lowered its outlook for global oil demand, forecasting a 2.5 million-barrel-a-day contraction in 2026, the largest annual decline since the Covid-19 pandemic, as higher prices and tighter supplies weigh on consumption. The IEA warned demand could weaken further if the conflict persists, while OPEC cut its 2026 demand-growth forecast for a fifth consecutive time. Despite Friday’s decline, Brent rose for a second week as Houthi threats to Saudi Arabia continue to raise supply concerns.

Brent crude slipped below $105 a barrel on Friday but remained almost 9% higher for the week as investors weighed diplomatic efforts to ease tensions around the Strait of Hormuz against continued fighting across the Middle East. Gulf foreign ministers are expected to meet their Iranian counterpart in Oman on Monday as part of efforts to secure support for a temporary arrangement to manage shipping through the strategic waterway. Meanwhile, the International Energy Agency sharply downgraded its outlook for oil demand, forecasting a 2.5 million-barrel-a-day contraction in 2026, the largest annual decline since the Covid-19 pandemic as higher fuel prices and tighter supplies weigh on consumption. The IEA said demand could fall further if the Iran conflict persists. OPEC has also reduced its 2026 demand-growth forecast for a fifth consecutive time. However, renewed advances by Iran-backed Houthi militants towards the Bab al-Mandeb Strait have raised fresh concerns over supply disruptions.