Oil Slips as Iran Talks Fuel Volatility

SUBSCRIBE SEARCH ARTICLES NEWS Oil retreated from five-month highs amid uncertain Iran negotiations and volatile trading. Image by Gaetano Leggio via iStock

Brent oil edged lower in a choppy session, with traders parsing the status of negotiations between the US and Iran against a backdrop of persistent unrest in the Middle East.

The global benchmark settled near $109 a barrel after Bloomberg reported that claims the US and Iran are close to an agreement are inaccurate. An earlier unconfirmed report on Iran war negotiations had knocked oil off of five-month highs, with the commodity at one point falling as much as 3.3% before paring losses, while European natural gas futures also dropped.

Crude prices have jumped about 80% this year as hostilities flare across the Middle East, with Iran most recently stepping up attacks on tankers in the Strait of Hormuz. Though traders have grown adept at tuning out wartime rhetoric, particularly Washington's efforts to jawbone prices lower, headlines signaling material changes to flows can still jolt the market.

Traders are particularly wary of potential efforts by the White House to dial down its Iran conflict before the Nov. 3 midterm election, with soaring energy costs set to be a key voter issue. When prices last topped $100 a barrel for an extended stretch nearly five months ago, the US and Iran entered a short-lived ceasefire agreement that briefly reopened Hormuz, the vital energy transit route.

"This close to the election, the optics are just as important as the fundamentals," said Dan Pickering, chief investment officer at Pickering Energy Partners. "Folks are concerned about potential market-moving headlines and a little quicker on the trigger to take profits."

The midday drop was also amplified by overstretched bullish positioning. Trend-following commodity trading advisers are sitting at 100% maximum long in both Brent and WTI, according to Kpler. That leaves positioning vulnerable to a sharp unwind on bearish news. Oil was also trading in overbought territory on its nine-day Relative Strength Index last week, typically a signal that crude is due for a pullback.

The inaccurate report on the Iran talks is one of several that "reduces the willingness for risk taking and therefore results in even less liquidity and makes price movement worse and harder to call," said Scott Shelton, an energy specialist at TP ICAP Group Plc.

Open interest in the global benchmark touched the lowest since March 2025 earlier this month, as traders flee positions to sidestep volatility. West Texas Intermediate was particularly volatile just ahead of its expiration, with the US benchmark's November contract trading in a roughly $9 range on Tuesday.

Iranian attacks on vessels in Hormuz in recent weeks have increased the market's risk premium and made prospects for an end to the war appear increasingly remote. Iran is inflicting greater damage than earlier in the conflict, raising the odds that fewer tankers will be available to transport crude. In the latest episode, the country's state media reported that an oil supertanker hit a mine in Hormuz.

Despite a recent flareup in hostilities around the waterway, crude exports from the Gulf have continued at an accelerated pace. US Energy Secretary Chris Wright told Fox News that flows had recovered to about 80% of their prewar level, although refined-product shipments remained constrained.

Oil Prices

• Brent for December settlement was 0.7% lower to settle at $108.79 a barrel in New York.
• WTI for December delivery fell 0.7% to settle at $97.82 a barrel
  • The November contract, which expires Tuesday, decreased 1.8% to settle at $101.79 a barrel.
    

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