Oil rises after reported US strike on Iran’s Qeshm Island

Oil had its steepest one-day drop in more than three months on Monday, Nov. 2. Brent crude settled down 7.6% at $104.77 a barrel after Washington and Tehran both signaled they were open to a diplomatic end to their war, according to Hurriyet Daily News. Gold rose 1.9% that day, coming off a one-year low as cheaper energy eased worries about inflation, Investing.com reported. The calm didn't last. By Tuesday crude was rising again and precious metals were slipping, as a reported US strike on Iranian territory and the US midterm elections kept traders on edge.investing.com+1

Peace signals hit crude

Iranian President Masoud Pezeshkian said Supreme Leader Ayatollah Mojtaba Khamenei had given the government "certain authorities" for peace talks, and that Tehran "will try to resolve the problem with dialogue," Dawn reported. President Donald Trump also pointed to progress in the talks, which Qatar is mediating. West Texas Intermediate fell 7.4% on the day. Brent had ended October at a six-month high.moneycontrol.com+3

Raymond James analyst Pavel Molchanov said some skepticism was justified after many "false dawns over the past several months".dawn.com

Prices held near $105 in early Asian trading on Tuesday, then rose. The gains followed a report that the US had struck Iran's Qeshm Island late Monday, CNBC reported. A senior Iranian official also said the two sides were far from a deal and that Tehran would not accept Washington's "excessive demands," according to Asharq Al-Awsat. "Just when markets were starting to price in a more diplomatic path, this reminder of ongoing military activity has flipped the tone," said Tim Waterer, chief market analyst at KCM Trade.english.aawsat.com+1

Gold and silver give back gains

Silver rose more than 3% on Monday. Both metals fell on Tuesday. Waterer said gold "continues to be sold as a high-liquidity asset to cover losses and margin calls elsewhere rather than being bought as a traditional safe haven". Gold lost 6.8% in October and fell below $4,000 late in the month. Selling of AI-related stocks added to the pressure.brecorder.com+2

Rates and the midterms

Higher energy prices have kept rate-hike expectations alive. Traders see a 74% chance of a Federal Reserve hike in December, based on CME's ↘ 0.44% FedWatch tool. Last week, two Fed regional presidents said rates will need to go higher to bring inflation down.cnbc.com+1

The midterm vote is being held Tuesday. Some analysts warn that Brent could reach $120 if fighting picks up again after the election. Iran's parliament speaker, Mohammad Bagher Qalibaf, put the next move on Washington. "The ball is in the US' court," he said.gulfnews.com+1