Oil falls as White House seeks to revive Iran peace talks, WSJ reports

Oil prices fell on Thursday as prospects for renewed peace talks between the U.S. and Iran eased fears of supply disruptions caused by the escalating conflict in the Middle East, CNBC reports. Brent crude futures fell more than 1% to an intraday low of $113.25 per barrel. U.S. West Texas Intermediate crude futures dropped almost 2% to $100.56 per barrel.

The decline followed reports that U.S. Vice President JD Vance had contacted Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, in an effort to revive peace talks. The Wall Street Journal reported the outreach, citing unnamed U.S. officials and people familiar with the discussions. The newspaper describes Rezaei as one of Iran’s most powerful hard-liners toward the U.S.

Meanwhile, Reuters reported on Wednesday, citing a source briefed on the negotiations, that Qatari mediators had presented Tehran with a new proposal to end the conflict between Iran and the U.S. and Israel. However, a senior Iranian official had already rejected the ideas as unacceptable and insufficient to constitute an offer, according to Reuters. CNBC also noted obstacles to a diplomatic breakthrough.

Meanwhile, investors are weighing the risk of further attacks on Saudi Arabia by Yemen’s Iran-backed Houthis, as well as the possibility of U.S. military action against Iran after the November 3 congressional midterm elections, CNBC adds. The WSJ also reported that possibility this week, citing sources.

“Pricey crude remains the predominant driver of above-target inflation,” Interactive Brokers senior economist José Torres wrote in a note to clients late Wednesday, according to CNBC. Broader price pressures, however, remain relatively contained. Torres said the concentration of inflationary pressures in energy justified a more patient approach from the Fed, particularly with underlying inflation still relatively subdued.

Raising interest rates too aggressively in response to an oil supply shock could weaken employment and exacerbate credit vulnerabilities, Torres suggested. Still, he stressed that “there could be a geopolitical resolution right around the corner.” That could ease inflationary pressures and shift the Fed’s focus away from further rate hikes. A decline in WTI prices toward $70 per barrel would materially strengthen the case for eventual rate cuts, Torres reckons.