Oil drops as Trump rules out pre-election Iran strike, easing supply fears

Oil prices slid on Friday as Middle East supply concerns eased after President Donald Trump said the US would not attack Iran before November’s midterm elections, with talks to end the eight-month war described as “productive.”

Brent crude futures dropped $1.70, or 1.63%, to $102.58 a barrel by 1200 GMT, according to Reuters data. US West Texas Intermediate crude fell $1.08, or 1.18%, to $90.41. On a weekly basis, Brent is set to rise after settling 4% higher on Thursday, while WTI is on track for a slight decline.

Trump’s pledge, along with China’s resumption of refined fuel exports, were moving prices lower, said Tamas Varga, an analyst at PVM Oil Associates, as reported by Reuters.

Prices have been volatile this week as threats to shipping in the Gulf and the Strait of Hormuz — which carried shipments equal to about 20% of global oil and fuel before the war — have increased in October.

Trump said on Thursday that Washington was having “productive discussions” with Iran and that no attack was planned before the November 3 midterm congressional elections, following media reports that he was considering a strike before then.

Iran’s Tasnim news agency reported the same day that Foreign Minister Abbas Araqchi said Tehran is reviewing the US response to its proposal that would reopen the Strait of Hormuz within seven days, according to Reuters.

The US is still pressuring Iran economically, imposing sanctions targeting individuals, networks and 17 vessels for transporting Iranian crude, oil products and petrochemicals.

The Iran war and the conflict between Russia and Ukraine have disrupted supplies of refined fuels such as gasoline, jet fuel and especially diesel fuel.

China, the world’s top oil importer, is set to resume refined fuel exports after a brief halt during its Golden Week holiday, a move that will somewhat help to ease market tightness, Reuters reported on Friday, citing sources.

“A sustained normalisation (of the market) will require a meaningful recovery in refinery operations, lower shipping costs and a rebuilding of depleted product inventories,” Saxo Bank analyst Ole Hansen said in a note, as reported by Reuters. “Until then, diesel and other middle distillates are likely to remain under pressure as Northern Hemisphere winter demand approaches.”

The oil market is also contending with Hurricane Isaias in the Gulf of Mexico, where producers have shut in about 1.3 million barrels per day, or 62.9%, of current oil production as of Thursday, according to the US Marine Minerals Administration.

Crude prices later pared some losses after Trump said Russia had agreed to immediately supply more than 300,000 tons of diesel to the US and global marketplace, according to Channel News Asia. Despite that, diesel prices remain well above $6 a gallon in the US. Brent and WTI both settled up 0.4% on Friday, with Brent at about $104 a barrel, Channel News Asia reported.

The retreat in oil helped support broader financial markets. US stock indexes were set for a higher open, with the S&P 500 and Nasdaq both heading for weekly gains despite a pullback over the previous two sessions, according to Reuters. The blue-chip Dow was also on track for slim weekly gains, and the equal-weighted S&P 500 was on track to snap a seven-week losing streak.

US Treasury yields were calmer, with the benchmark 10-year yield steady at 5.24% but holding close to the 24-year high of 5.364% hit on Wednesday, Reuters reported.

“Strong earnings, guidance and evidence of sustained AI demand could quickly rebuild conviction and put new highs back on the radar,” said Chris Weston, head of research at Pepperstone, as reported by Reuters.

The third-quarter earnings season picks up pace next week with big banks set to report results, including Goldman Sachs, JP Morgan and Wells Fargo, according to Channel News Asia.