Oil's slide got deeper as Monday went on. By 18:15 UTC, Brent was down 8.5% from Friday's close, and WTI, the US benchmark, had lost 8.2%. Both had been down about 4% this morning, when we reported on the weekend talks in Doha. US gasoline futures fell more than 8%, and diesel futures dropped nearly 6%.
If Brent ends the day near this level, it will be its biggest one-day fall on our data since April 8. That was the day the US and Iran announced a two-week ceasefire.
Two signals from Tehran
Comments from Tehran gave the market its next push. According to Iranian state media, President Masoud Pezeshkian said Mojtaba Khamenei, the country's supreme leader, had handed the government "certain authorities" over peace talks. He gave no further detail beyond saying Tehran "will try to resolve the problem with dialogue." Analysts quoted by Reuters linked a sharp leg lower in prices to his comments.
Reuters also had news from Qatar. Iran's negotiators left Doha on Sunday after three days with Qatari mediators. An official familiar with the process told Reuters on Monday that a draft proposal for a US deal is now going around for feedback. A further meeting may take place. The Iranians did not leave because the talks had hit a wall, the official added. The contents of the draft have not been made public.
Abbas Araghchi, the foreign minister, told state media that a deal can happen if Washington "demonstrates goodwill." Tehran's own plan, first put forward at the UN in New York in September, is what the mediators are working on, he said. At the top of Iran's list is an end to the US naval blockade, followed by sanctions relief and fewer US forces stationed in the region. Araghchi said Pakistan is also carrying messages alongside Qatar, and that the next move belongs to Washington.
Washington keeps both doors open
The US has not commented on the draft. Trump has promised no new strikes on Iran until Tuesday's vote is over. Over the weekend, Marco Rubio, the secretary of state, told reporters that the president would rather reach a peaceful outcome.
Trump has also kept up the pressure. Speaking to supporters in Iowa late on Sunday, he said that "at some point, we're going to have to give them the hammer." Axios reported that Benjamin Netanyahu, Israel's prime minister, used a Saturday phone call to argue for restarting strikes as soon as the vote is done. Trump said he wanted to see where the talks go first.
Beijing and Moscow also came out against any new military action on Monday, Reuters reported.
How much of the risk premium is gone?
Much of October's rally came from fear that the US would strike Iran again once the vote is over, after reports last week that options were being drawn up. Monday showed how fast that premium can shrink when talks start to look serious.
Analysts doubt it will disappear on headlines alone. TD Securities' Ryan McKay, who heads commodity strategy at the bank, said news on diplomacy moves prices a lot because so much of the rally was a bet on the conflict getting worse. Even so, he does not expect talk of diplomacy by itself to erase that premium while tankers keep getting attacked and the Houthis keep firing.
In Goldman Sachs' view, the premium will only fade fast if there is "a diplomatic solution that market participants see as sustainable," analyst Daan Struyven said.
ING noted that the biggest shifts in the conflict have tended to happen on Saturdays and Sundays. "The market may have to hold its breath until the end of the week," its strategists wrote.
What to watch
- Tuesday's midterm elections. Trump has put any decision on new strikes after the vote.
- A second round on the draft. The official who spoke to Reuters said another meeting is possible but gave no date.
- Mixed signals from Tehran. While the government talks, Khamenei told the armed forces on Saturday to answer "any level or type of threat" right away and with no geographic limits.