Oil prices fall as Tehran talks ease Iran war fears

Oil prices fell about 1% on Tuesday, Oct. 27, after talks in Tehran raised hopes that the U.S.-Israeli war with Iran could ease. Renewed Houthi attacks on Saudi Arabia and disruption in the Strait of Hormuz limited the drop. Brent crude and U.S. West Texas Intermediate both lost a little under 1% in Asian trading.cnbc.com+1

The decline added to a pullback from multi-month highs. Brent rose above $117 a barrel last week, its highest level since April, after a wave of Iranian attacks on tankers around Hormuz. It touched $117 again on Monday before falling back. On Monday, Brent settled near $116.rigzone.com+1

Talks in Tehran

On Monday, Saudi Defence Minister Prince Khalid bin Salman, Pakistani army chief Field Marshal Asim Munir and Turkish intelligence chief Ibrahim Kalin met Iranian President Masoud Pezeshkian and other officials in Tehran. According to Iranian state media, the four countries agreed to keep talking about peace and security. Riyadh said the aim was to keep diplomatic channels open and prevent another escalation. Qatari mediators also traveled to Tehran on Sunday.cnbc.com+1

"Crude oil prices are witnessing profit-taking after surging to multi-month highs," said Sugandha Sachdeva of New Delhi-based SS WealthStreet. Francisco Blanch of Bank of America said in a Bloomberg TV interview that if Iran resumes attacks on regional infrastructure, "$120 a barrel is probably on the cards on average for the next few months".rigzone.com+1

Houthi attacks and Hormuz risk

The Houthis said Monday that they had hit pumping stations on Saudi Arabia's East-West crude pipeline. Saudi authorities had not confirmed that claim, but the Saudi-led coalition reported shooting down a ballistic missile and drones over Riyadh. Data from the Washington Institute for Near East Policy show October has been the worst month for attacks on shipping in and around Hormuz since it began tracking in 2017, with 28 attacks recorded this month.economymiddleeast.com

Estimates of how much oil is getting through differ. ANZ Research said Gulf crude exports fell for a fourth straight week and that flows through Hormuz were at about 60% of normal. Bloomberg reported that Middle East shipments are estimated to be close to pre-war levels, helped by U.S. escort support.en.ammonnews.net+1

Election-season uncertainty

Investors are also watching Israel's election on Tuesday and the U.S. midterms on Nov. 3. Brent is up more than 80% this year. President Donald Trump told Fox News ↗ 3.10% on Sunday that he was close to deciding whether to make a deal with Iran or step up military action.rigzone.com+1

"The market is pricing in some risk of escalation after the US midterm elections, when Washington may feel less constrained by the immediate political cost of higher oil prices," said Jorge Leon of Rystad Energy.rigzone.com