WTI approaches the $100 threshold as diplomatic progress weakens oil prices

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WTI faces a critical support test

Iran talks prompt a reduction in the geopolitical risk premium

The main catalyst for today's decline has been a shift in geopolitical expectations following reports of continued negotiations between Iran and Qatar aimed at ending hostilities and restoring energy shipments through the Strait of Hormuz. In the futures market, WTI lost approximately 3.4% in the morning, falling to $100.62, while Brent declined by around 3% to $110. Thus, investors have begun actively reducing the geopolitical risk premium accumulated in oil prices throughout October, although the actual recovery of supplies remains uncertain.

Shipping threats persist despite diplomatic efforts

In the Middle East, market participants are primarily focused on diplomatic contacts that have continued for three consecutive days under Qatar's mediation. The Iranian side confirmed discussions of proposals concerning an end to the conflict and the resumption of safe shipping through the Strait of Hormuz, although no final agreement has yet been reached.

Another factor behind the decline in prices has been reports that Washington is prepared to give diplomatic efforts more time before considering new military operations. The absence of significant escalation over the weekend allowed market participants to partially reassess near-term risks to oil exports. Nevertheless, the situation remains extremely unstable: reports emerged over the weekend of damage to two more vessels in the Strait of Hormuz, while Saudi Arabia's oil infrastructure remains under threat of attacks.

In addition, the U.S. midterm elections on November 3 create uncertainty, as the American administration's rhetoric toward Iran could become more aggressive afterward. Therefore, today's decline in WTI primarily reflects a reduced probability of an immediate escalation of the conflict rather than the elimination of threats to the global oil market. The absence of a final agreement maintains the risk of a sharp return of buyers if new reports emerge of shipping disruptions or damage to export infrastructure.

$100 support becomes decisive for the near-term outlook

Despite the relatively substantial decline, the ability of bears to maintain their current control over the market may depend on whether they can break through the psychological $100 level, in which case, as I warned in WTI approaches $106 as Middle East attacks sustain oil supply fears, a decline toward $99–98 should be expected. If WTI prices consolidate above $100, they could return to resistance around $101.50–102, while a break above the latter level would lead to a rise toward $103–103.50.

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