Brent crude fell $2.28, or 2.1%, to settle at $104.32 a barrel on Friday. WTI lost $2.20 to $92.41. The trigger was an offer from Tehran: it would reopen the Strait of Hormuz within a week, if Washington pays a steep price first.
Iran's Foreign Minister Abbas Araghchi laid out the plan on the sidelines of the UN General Assembly in New York. "The moment they accept this plan, from the next day, this timetable can start, and after seven days, the strait will be open," he said, as quoted by Al Jazeera.
What Iran is asking for
Tehran's price is high. Its list, as reported by the Associated Press, has three parts:
- An end to the US Navy's blockade of Iran's ports
- Sanctions waivers so Iran can sell its crude again
- A ceasefire that stretches to Lebanon as well as Iran
Nuclear talks would restart after the strait opens. That order of events is the sticking point. Tehran wants the waterway settled first and its nuclear program handled later. Washington has pushed for a single package covering both.
None of this is new. Washington and Tehran signed a memorandum on June 17 built on much the same trade, but it gave both sides 60 days to finish the job. It fell apart within weeks, when tankers in the strait came under fire again in July. This time Iran wants the whole thing done in a week.
Washington keeps its distance
The White House said on Friday that US officials were having "positive and constructive conversations with mediators." It added that barrels are already leaving the Gulf with American help. By one US official's count, given to CBS News, American escorts shepherded nearly 40 million barrels through Hormuz over a 48-hour stretch.
Secretary of State Marco Rubio sounded cooler earlier in the week, saying there had been "no breakthroughs."
Qatar is carrying messages between the two sides. Its diplomats ran indirect US-Iran sessions in New York this week, and its foreign minister, Sheikh Mohammed bin Abdulrahman Al Thani, met Iranian President Masoud Pezeshkian on Friday.
Reuters reported on Thursday that negotiators in New York were weighing a step-by-step approach: Hormuz reopens, the blockade ends, and harder issues come later. One notable shift, per the regional sources Reuters spoke to: Iran would no longer insist on writing its Hormuz toll into the core deal and could park it in a separate annex. That matters because Gulf governments have flatly refused to pay Tehran to use the strait.
The midterm pitch
Timing is part of the sales job. Trita Parsi of the Quincy Institute, who attended an Araghchi briefing this week, put it plainly: "If Trump calculates this arrangement is worthwhile and can bring political benefit before the midterms and reduce gas prices, perhaps we'll see flexibility not seen in previous weeks." Americans vote on November 3.
Not everyone in Tehran sounds keen. "Our fingers are on the trigger," a senior Iranian official told Reuters, adding that the chances of diplomacy resolving the standoff were "extremely low."
Why the selloff stayed modest
A 2% drop is small for a headline this size. Traders have seen deals announced and abandoned several times this year, and nothing on the water changes until ships actually move.
Houthi attacks on Saudi Arabia also kept a floor under prices. Riyadh is not convinced by Tehran's offer either, the AP reported. The Saudis have become more cautious since the Houthis captured Yemen's western coastline and struck one of the kingdom's main oil pipelines.
Brent still ended the week up slightly. WTI finished about 8% lower, although part of that slide reflects the switch to a new front-month contract rather than fresh selling.
Brent now trades almost $12 above WTI. Reuters said the spread has not been that wide since May. One reason is the debate in Washington over curbing diesel shipments abroad, a step that could leave more fuel inside the US and cool demand for American crude. Ritterbusch and Associates said traders are still pricing in "the possibility of a (US) diesel export ban."
What to watch next
- A formal US reply to the seven-day offer, or a counter that puts the nuclear program first
- Houthi strikes near Yanbu, the Red Sea outlet for Saudi Arabia's Hormuz bypass pipeline
- Any concrete move on US diesel export limits, which has been driving the Brent-WTI spread