Diplomatic developments weighed on prices, with Iranian Foreign Minister Abbas Araghchi saying Tehran remained open to negotiations. The Wall Street Journal reported that US Vice President JD Vance had contacted Mohsen Rezaei, secretary of Iran’s top security body.

Crude oil price on October 29

Brent crude fell to $114.40 a barrel in early Asian trading, after rising more than 1% in the previous session. West Texas Intermediate (WTI), the US benchmark, dropped 1% to $102 a barrel.

US President Donald Trump told Axios on Wednesday that mediators were exchanging messages between the two sides, although he was unsure whether the talks would succeed.

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Despite Thursday’s decline, Brent has gained 11% this month, reaching its highest level since April as the conflict continued. Rising oil prices have put pressure on consumers and made it harder for central banks to contain inflation. The US Federal Reserve kept interest rates unchanged this week, while traders appeared to expect policymakers to resume tightening in December.

Trump has repeatedly suggested that military operations against Tehran could resume after voting in the US midterm elections, scheduled for November 3, potentially alongside Israel. The Associated Press reported that US officials had asked several West Asian countries and regional allies to prepare for renewed military action after the midterms.

Attacks continue

Concerns about escalating Houthi attacks and the possibility of a US strike on Iran after the elections have added to uncertainty in the oil market. The Saudi-led coalition fighting Yemen’s Houthis said it had destroyed a ballistic missile fired by the group towards Saudi Arabia’s eastern region early on Thursday. Hostilities between the two sides have continued, with no signs of easing.

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Yemeni government forces said the Houthis attacked Aden airport on Wednesday. The strike followed the group’s claim a day earlier that it had targeted Saudi Arabia’s largest oil refinery at Ras Tanura with a missile. The attacks mark an escalation against Saudi Arabia, the world’s second-largest crude producer after the United States. Saudi authorities had not immediately confirmed the reported strike on the facility, which has a capacity of 550,000 barrels per day.

Meanwhile, Qatari mediators have presented Iran with a new draft proposal to end the war involving the US and Israel, according to an official briefed on the negotiations. However, a senior Iranian official rejected the proposals, describing them as unacceptable ideas that did not constitute an offer.

Where are prices headed?

The uncertain trajectory of the conflict continues to complicate the outlook for oil prices. JPMorgan analysts said assessing how the war would develop remained difficult. At the start of the conflict, the bank had expected the US administration to avoid crossing certain economic thresholds. Seven months later, many of those limits had been crossed, while a clear strategy for ending the conflict remained absent.

The threat of further supply disruptions has reinforced expectations of higher oil prices. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks had highlighted the potential for shipping disruptions to spread and worsen. Goldman Sachs has outlined a scenario in which oil prices could climb to $120 a barrel if attacks on vessels in the Middle East intensify. However, prices could decline towards $80 a barrel if exports return to normal. Struyven said shipping risks had become a major factor influencing oil prices and that the bank saw significant upside potential for crude.

Goldman Sachs also expects natural gas and refined fuel prices to rise, noting that supply shocks have a greater impact on gas and refined products than on crude oil.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.

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