Oil Falls for Second Day as US-Iran Escalation Fears Ease; WTI Near $101
Summary
- International oil prices fell for a second straight day, sending WTI down to around $101 a barrel.
- Diplomatic mediation by major Middle Eastern countries and Russia’s energy diplomacy did little to reduce still-elevated military risks across the region.
- With Brent crude prices up about 90% this year, markets are now focused on the Fed’s policy decision and major US political and economic events including the midterm elections.
Forecast Trend Report by Period
International oil prices fell for a second straight day as diplomatic efforts continued to ease military tensions between the US and Iran.
Bloomberg reported on October 26 that West Texas Intermediate crude fell to around $101 a barrel after dropping 1.5% in the previous session. Brent crude, the international benchmark, also traded below $116 a barrel.
The decline was driven in part by diplomatic mediation efforts by key Middle Eastern countries. Senior officials from Saudi Arabia, Pakistan and Turkiye visited Tehran a day earlier to discuss ways to defuse tensions. Iran’s state broadcaster IRIB reported that the countries agreed to continue consultations.
Russia is also pursuing diplomacy related to the Middle East situation. President Vladimir Putin is set to meet separately with Iranian President Masoud Pezeshkian and Qatar’s Emir Sheikh Tamim bin Hamad Al Thani on the sidelines of an energy summit in Moscow on October 26.
Military risks in the Middle East remain elevated, however. The Saudi-led coalition said it shot down three drones over the capital, Riyadh. Lebanon’s Hezbollah, which receives funding from Iran, is also reportedly preparing for a new regional war.
Brent crude prices have surged about 90% this year. The jump reflects disruptions to energy supply chains caused by the war between the US and Iran, along with continued attacks by Yemen’s Houthi rebels that have intensified concerns over crude supply.
Markets are also watching major political and economic events. Israel’s general election is scheduled for October 27, followed later this week by the Federal Reserve’s monetary policy decision and the US midterm elections on November 3.
The Fed raised its benchmark interest rate last month for the first time since 2023 to respond to inflation pressures. More recently, however, Fed officials have signaled they will not rush to deliver additional rate increases despite rising energy prices.
