Crude Oil Slips as Pre-Election Diplomacy on Iran Intensifies Between Israel and the United States

Crude oil prices fell for a second straight day, pulling further back from a six-month peak.

As diplomatic efforts intensify, the market is increasingly betting that a war between the United States and Iran can avoid a broader escalation.

Brent crude futures dropped below US$115 a barrel, while WTI crude futures hovered near US$101.

According to Islamic Republic of Iran Broadcasting (IRIB), senior officials from Saudi Arabia, Pakistan and Turkey traveled to Tehran on Monday for consultations, and the parties involved agreed to hold further talks.

Separately, Russian President Vladimir Putin is scheduled on Tuesday to meet Iranian President Masoud Pezeshkian and Qatari Emir Tamim bin Hamad Al Thani on the sidelines of an energy summit in Moscow.

Still, even though crude shipments have recovered to near pre-war levels, risks remain high and shipping costs stay elevated.

Hezbollah in Lebanon is reportedly preparing for a new regional war after receiving Iranian funding.

The Saudi-led coalition said it destroyed three drones in Riyadh.

Saul Kavonic, a senior energy analyst at MST Marquee, said: "Right now the market is facing a bearish signal from the recovery of Middle East oil supply on one hand, while on the other it sees reports that diplomatic channels with Iran remain open."

He said oil prices could swing sharply in either direction depending on whether the conflict escalates.

Ahead of Israel's election, Prime Minister Benjamin Netanyahu pledged to topple the Tehran regime with the support of U.S. President Donald Trump.

His rival, opposition leader Gadi Eisenkot, said Iran's nuclear program must be stopped, but he also said regime change is "not an achievable goal."

The U.S. midterm elections could become another turning point, as Trump has hinted that strikes on Iran may resume after voting ends.

Over the weekend, Trump told Fox News that it is now "getting close to decision time" — either reach a deal with Tehran or "finish it off completely."

Currently, U.S. forces are blockading Iranian ports to cut off Iran's crude exports, while helping crude from other Persian Gulf producers transit through the Strait of Hormuz.

During Monday's talks, Iran told Saudi Arabia, Turkey and Pakistan that it is flexible on a proposal to reopen the waterway within seven days in exchange for the United States lifting restrictive measures.

As of 10:36 a.m., Brent futures for December settlement fell 1% to US$114.63 a barrel.

WTI crude futures for December delivery fell about 1% to US$100.78 a barrel.