Oil Prices Fall as U.S. and Iran Signal Diplomacy; Brent Down 3.31%

Oil prices fell on Monday after the United States and Iran both signaled they are open to diplomacy over their conflict. Brent crude futures for January delivery dropped 3.31% to $109.67 a barrel, while U.S. West Texas Intermediate futures for December fell 3.34% to $100.64 per barrel.

Rubio says Trump prefers peace

U.S. Secretary of State Marco Rubio said President Donald Trump prefers not to use military force and wants to resolve the Iranian war diplomatically. Rubio spoke to reporters over the weekend. He said Trump “hasn’t made a decision” but expressed confidence that the U.S. would have the ability to act militarily if needed. “What the president expresses to you is incredible confidence that if we needed to do something militarily, we would have the ability to do it, and we really we have everything we need to be successful. But we would prefer to do it peacefully,” Rubio said.

Iran says deal still possible

Iranian authorities also signaled a deal is still possible after two days of talks mediated by Qatar, as long as demands are implemented tangibly, according to Al Jazeera. The comments followed reports that both the U.S. and Iran were preparing for more military strikes after the midterm elections. The Wall Street Journal and The New York Times reported that the U.S. was preparing for possible renewed military action after the Nov. 3 midterm elections.

Iranian Supreme Leader Mojtaba Khamenei on Saturday called for Tehran’s armed forces to meet “any level or type of threat” with “an immediate, impactful, and geographically unrestricted response.”

Market concerns remain

Concerns over the Middle East and Ukraine conflicts will likely linger in the near term. “Attacks on ships and refineries in the Middle East and on civilians in Ukraine continue, doing little to inspire confidence in the prospects for lasting ceasefires in the foreseeable future,” said Tamas Varga, analyst at PVM Oil Associates. “Nonetheless, hope springs eternal,” Varga added.

For Nigeria, a fall in Brent matters because oil sales are a major source of government revenue and foreign exchange. Lower prices can reduce dollar inflows just as consumers and businesses are already dealing with a weak naira. The market will watch whether the diplomatic signals hold or whether military risks push crude prices back up.