Crude oil prices fell sharply Monday as senior U.S. and Iranian officials signaled openness to a diplomatic resolution to the conflict disrupting energy markets, with Brent crude futures dropping 7.3% to $105.14 a barrel and U.S. West Texas Intermediate declining about 7% to $96.87 per barrel by 11:25 a.m. ET.
The decline came after U.S. Secretary of State Marco Rubio indicated President Donald Trump prefers not to use military force against Iran and would like to resolve the conflict diplomatically. Rubio told reporters over the weekend that the president has "incredible confidence" in U.S. military capability if needed but "we would prefer to do it peacefully." Meanwhile, Iranian Foreign Minister Abbas Araghchi told state-owned Islamic Republic News Agency that an agreement with the U.S. is possible if Washington "demonstrates goodwill" and is "truly seeking a peaceful solution." Araghchi said mediators are discussing the proposal Iran made during the United Nations General Assembly in September, under which Tehran expects the U.S. to lift sanctions, reduce its military presence in the region to previous levels and lift the blockade.
Iranian negotiators left Qatar over the weekend after holding talks with Qatari mediators, and a draft proposal is now being circulated for a potential follow-up meeting. Iran this weekend said the Strait of Hormuz could reopen within two days if its demands are met, faster than the weeklong timeline Tehran had aired in September. U.S. President Donald Trump rejected Iran's September proposal.
Market concerns about potential U.S.-Israel strikes on Iran persisted, with analysts noting that many key developments in the conflict have unfolded over weekends. ING's strategists said "the market may have to hold its breath until the end of the week." Early in the session, Brent had dropped to $108.61, down 4.25% on the day, and WTI slumped by 4.32% to below $100 a barrel, at $99.62.
The price action reflects a market increasingly bracing for the potential for more hostilities between the U.S. and Iran. If the midterms pass with neither strikes nor a deal, the key question is whether the market continues to price in a substantial geopolitical risk premium or whether that premium gradually begins to unwind. Given that many of the key developments in this conflict have unfolded over weekends, the market may have to hold its breath until the end of the week.
