Oil prices fell on Monday morning as talks in Qatar revived hopes of reopening the Strait of Hormuz, but US President Donald Trump kept the threat of fresh strikes alive and Israel's Benjamin Netanyahu reportedly urged him to hit Iran straight after Tuesday's midterm elections.
Oil started the week on the back foot, with Brent crude, the global benchmark, trading at around $108.5 a barrel on Monday morning, down roughly 2.8% from its Friday close, as Iranian negotiators held talks in Qatar on a plan to reopen the Strait of Hormuz.
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The US benchmark West Texas Intermediate also fell 3% to under $100 a barrel.
However, there were few signs of a breakthrough behind the market move.
US President Donald Trump kept military options open, while Israeli Prime Minister Benjamin Netanyahu reportedly pressed him to strike Iran as soon as Americans had voted in Tuesday's midterm elections.
Shipping through the Strait of Hormuz, the narrow waterway between Iran and Oman that normally carries around a fifth of the world's oil, has been heavily disrupted since the war began in late February.
Iranian Foreign Minister Abbas Araghchi said over the weekend, in an interview posted on Telegram, that the plan under discussion could see the strait reopened in as little as two days, provided Washington met a series of conditions.
Araghchi added that Tehran was not holding direct talks with the US, and that the outcome would depend on how Washington answered Iran's questions.
Iranian officials have previously demanded an end to the US naval blockade of Iran's ports, the lifting of sanctions on its oil exports and a halt to fighting on all regional fronts.
Mixed signals from Washington
Speaking to reporters at a Halloween party at his Mar-a-Lago resort in Florida on Saturday night, Trump said the negotiations were "going fine", though he described the Iranians as "not very reliable".
"We're not in that much of a hurry from the standpoint that we've knocked out their navy, we've knocked out their air force,” Trump said. However, he added that the US still had "to take care of, I would say, one or two sites", which could be done "in 10 minutes".
Asked whether he expected to return to war this week, Trump replied: "Let’s say I did. Would I tell you?"
US Secretary of State Marco Rubio also said on Saturday that no decision had been made on resuming military action.
Last week, the Wall Street Journal reported that US Vice President JD Vance had written to Mohsen Rezaei, secretary of Iran's Supreme National Security Council, at Trump's direction to revive peace talks.
Trump denied this, saying the outreach concerned medical supplies Iran needed.
Benjamin Netanyahu urged Trump in a phone call on Saturday to resume strikes immediately after the midterms, news site Axios reported, while Trump wants to give diplomacy more time.
Trump described the call as "very good".
Netanyahu is also fighting for his political future as his bloc won 53 of the 120 seats in the Knesset, Israel's parliament, in the 27 October election, short of the 61 needed for a majority, while the opposition bloc led by former army chief Gadi Eisenkot took 48.
Netanyahu's Likud party has claimed, without evidence, that the vote was stolen.
A war premium is still priced in
Goldman Sachs said in an investor note on Monday that a geopolitical risk premium of around $27 a barrel "now explains most of October's crude price rally", which briefly took Brent to $118.
The bank raised its forecast for Brent at the end of this year to $105 a barrel from $90, saying markets were putting more weight on the risk of escalation after the US midterms.
Supply risks also remain.
The UK Maritime Trade Operations centre, which monitors shipping in the region, said on Sunday it had received a report of a projectile hitting a vessel in the Strait of Hormuz.
On Friday, Iran had also reported multiple strikes against ships, signalling that tensions in the maritime chokepoint have not eased.
