Oil futures close down more than 7% after renewed U.S.-Iran diplomacy

Intraday drop neared 10% before final WTI and Brent settlements

Oil futures sold off sharply on Nov. 2 as efforts to revive direct U.S.-Iran peace talks reduced the geopolitical risk premium in energy markets. The 1532 ET update reported the final settlements: WTI settled down 7.4% at $96.46 a barrel and Brent fell 7.6% to $104.77. The session produced oil futures’ biggest one-day percentage decline since July, with the drop reaching almost 10% at one point before the close.

At 0000 GMT, front-month WTI was down 1.75% at $102.3 a barrel and Brent was down 1.6% at $111.59. At 0911 GMT, in early European trading, front-month Brent was down 3.9% at $109.04 a barrel and WTI was down 4% at $99.94.

At 1201 GMT, oil prices were extending losses in afternoon trade, with both benchmarks sliding more than 4% as talks involving Iranian officials and Qatari mediators raised hopes for U.S.-Iran negotiations. Brent was down 4.4% at $108.46 a barrel and WTI was down 4.5% at $99.40.

Naeem Aslam of Zaye Capital Markets said, “The latest decline reflects improving expectations surrounding diplomatic negotiations involving Iran, with renewed discussions raising hopes that regional hostilities and disruptions to energy shipments could eventually ease.” He said uncertainty remained elevated because the U.S. could resume military strikes against Iran following the midterm elections.

At 1534 GMT, oil and gas prices slid further in early U.S. trading on hopes for a diplomatic breakthrough in Middle East peace talks. Front-month Brent was down 6.6% at $105.95 a barrel, while WTI futures were down 6.6% at $97.29. In that same intraday observation, Europe’s TTF gas contract was down 8.7% at 94.90 euros a megawatt-hour. The sharp declines came after state-run news agency IRNA reported that Iran’s supreme leader had given the government certain powers to pursue negotiations.

At 0909 ET, crude futures were tumbling at the start of the week on hopes for U.S.-Iran peace talks. Scott Shelton of TP ICAP said “escalation longs” were at a peak so close to the U.S. midterm elections. He said, “there is nothing I see to suggest that this any different that previous peace attempts, and the size of the move is because positions have never been larger as people have their bets on for what is going to happen post U.S. midterms.” He added, “This next step is either escalation or Iran capitulating.” WTI was down 6.2% at $97.62 and Brent was off 6.1% at $106.57.

At 1318 ET, crude futures were deepening their decline as the market gave credence to the latest diplomatic moves aimed at bringing the United States and Iran to the negotiating table. Peter Cardillo of Spartan Capital said the market was reacting to President Trump’s willingness to allow more time for a diplomatic solution to end the war. Cardillo wrote, “The shift in position now appears to be gaining credibility with investors, prompting traders to increase short positions and driving a sharp reversal in technical indicators.” WTI was down 8.1% at $95.70 a barrel and Brent was down 8.5% at $108.83.

In an 0911 GMT update, oil prices were down more than 3.5% ahead of the U.S. midterm elections as diplomatic discussions involving Qatari mediators over a potential deal to reopen the Strait of Hormuz eased the risk premium, though concerns about possible U.S. military strikes remained elevated. Talks involving Iranian officials and Qatari mediators progressed and raised hopes for direct U.S.-Iran negotiations. JD Vance, the U.S. vice president, sent a message to Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, in an effort to restart peace talks, The Wall Street Journal reported.

Key members of OPEC and their allies agreed Sunday to keep oil production steady in December, while concerns remained that the U.S. could resume strikes after the midterm elections.

Ritterbusch & Associates said the drop of almost 10% at one point “appears to be a significant overreaction to today’s headlines.” The firm pointed to an overbought technical condition following last month’s sizable crude gains, which included a Brent advance of more than 13%.

ING analysts said the recent price action reflected a market increasingly bracing for the potential for more hostilities between the U.S. and Iran. Because many key developments in the conflict had unfolded over weekends, ING said the market might have to “hold its breath until the end of the week.”

In a 0937 GMT update, Goldman Sachs raised its oil forecasts, saying persistent Middle East supply risks were expected to sustain a sizable geopolitical risk premium in the near term. The bank now expected Brent to average $105 a barrel in December 2026 and $88 in 2027, up from previous forecasts of $90 and $80, respectively. Goldman estimated that a geopolitical risk premium of around $27 a barrel accounted for most of October’s oil price rally, while Brent’s fair value remained broadly stable in the $90s and global inventories, a key driver of prices, changed little.

Goldman expected markets to price in a higher risk premium because of downside risks to Middle East supply, the length of past major oil supply shocks and many market participants’ view that a lasting diplomatic breakthrough would be difficult. Its analysts identified intensified shipping attacks, damage to oil infrastructure and a more persistent risk premium as the most likely triggers for an upside price scenario.

In a 1027 GMT analysis, Goldman said Brent could reach $140 a barrel and average around $130 next year if Gulf oil production remained significantly below prewar levels. The bank projected Gulf output would be 3.5 million barrels a day below its 2025 average, compared with 1.1 million barrels a day above that level in its base case.

A U.S.-Iran deal could produce the opposite result. If Gulf production recovered faster than expected and a deal appeared sustainable to markets, output could rise 2.5 million barrels a day above 2025 levels and Brent could fall into the $60s, Goldman said.