Oil slides after Trump says US will end Israel aid

Oil prices swung sharply on Tuesday, November 3. They first rose after the United States struck Iran's Qeshm Island, then fell after President Donald Trump said Washington would end its annual military aid to Israel and Qatar reported progress in talks with Tehran. Brent crude hit its lowest level since October 8 during the session, after trading above $107 a barrel earlier in the day, Reuters reported.reuters.com

This was the second straight daily decline. On Monday, Brent fell $8.66, or 7.63%, to settle at $104.77 a barrel, as hopes grew for a negotiated end to the eight-month war, according to CNBC.cnbc.com

From strike to selloff

US officials told The Wall Street Journal News Corp ↘ 1.23% that Washington attacked Qeshm Island on Monday and that the US has carried out "limited strikes" against Iran in recent weeks, CNBC reported. Some officials called the strikes defensive, saying they were meant to stop Iran from attacking commercial ships in the Strait of Hormuz. A senior Iranian official said the two sides were far from a deal and that Tehran would not accept Washington's "excessive demands," RTÉ reported, citing Reuters.cnbc.com+1

The mood shifted when Trump spoke to Fox News' ↗ 6.56% "Fox and Friends." "We've already agreed that by the end of this year we won't be paying Israel," he said, referring to $4 billion in yearly support, according to Reuters. The Times of Israel noted that the bilateral memorandum covering the aid does not expire until September 2028. The pan-European STOXX 600 recovered its losses and S&P 500 ↗ 0.30% futures edged higher. Brent later recovered some ground, rising back to about $103 by midday ET, Today reported.today.com+2

Diplomacy and lingering risk

Qatar's foreign ministry spokesperson said the US and Iran remain committed to mediation and are reviewing proposals meant to narrow their differences, adding that talks with both sides had shown progress, according to Reuters.reuters.com

Analysts warned against assuming the danger has passed. "Despite these positive signals, it's probably too early to think escalation risks have passed," ING ↘ 1.53% said in a note, adding that strong signs of progress in peace talks would push prices lower still, Reuters reported. Fortune India pointed out that shipping security through the Strait of Hormuz, a key route for crude and liquefied natural gas, is still the market's main concern, Fortune India reported.fortuneindia.com+1

The price swings came on the day Americans voted in midterm elections. Voters' frustration with the Iran war and the higher fuel prices it caused has become a major issue. Brent ended October at a six-month high amid fears that fighting could escalate again after the vote, Reuters reported.reuters.com