Oil Prices Slide as Peace Hopes Offset Iran Escalation Risks

Global oil prices declined in early trading today as expectations of a possible de-escalation in the Middle East continued to weigh on the market, despite persistent security threats to crude shipments through the Strait of Hormuz.

As at the time of writing 06:21 am (WAT). Brent crude futures fell by 0.33 per cent to $95.50 per barrel, while West Texas Intermediate (WTI) declined by 0.60 per cent to $88.21 per barrel.

The latest decline extends the retreat from crude's late-October peak of about $118 per barrel, with Brent having lost roughly 20 per cent as traders increasingly price in the possibility of reduced hostilities in the Middle East and progress towards ending the Russia-Ukraine war.

However, the easing of crude prices has not translated into a return to normal shipping conditions. Data from the Washington Institute for Near East Policy, cited by Reuters, showed that 37 attacks on vessels in and around the Strait of Hormuz were recorded in October, the highest monthly total since the war began on February 28. At least 10 additional vessels were reportedly hit in the first 10 days of November.

The International Energy Agency (IEA) also reported that the cost of transporting a barrel of crude from the Middle East Gulf to Asia on a large tanker exceeded $37 by mid-October, more than five times its pre-war level. Elevated freight rates, insurance premiums and security concerns continue to raise the cost of moving crude, even as regional exports recover.

Meanwhile, uncertainty over diplomatic efforts between Washington and Tehran remains a major source of volatility. US President Donald Trump said on Thursday that the United States did not need an agreement with Iran, arguing that Washington already had control over Iran's finances and the Strait of Hormuz.

Iran's Parliament Speaker and chief negotiator, Mohammad Bagher Ghalibaf, said Tehran was waiting for Washington's response to its seven conditions for starting peace talks. He also warned that navigation through the Strait of Hormuz would never return to its pre-war arrangements.

The conflicting positions have raised doubts about the prospect of a lasting agreement, leaving the market caught between hopes of reduced military confrontation and the possibility of renewed attacks on shipping. Trump had earlier said the US remained prepared to resume military action if necessary.

Gulf producers are also accelerating efforts to reduce their dependence on the Strait of Hormuz. Saudi Arabia is relying on Red Sea export routes, while the United Arab Emirates is expanding the use of pipelines to Fujairah, which provides access to the Gulf of Oman. However, these alternatives remain exposed to security threats as the wider conflict continues.

Although tanker rates have eased from their record highs in early October, vessel availability, insurance costs and operators' willingness to trade in the region remain major constraints. As a result, higher crude flows through the Gulf have not necessarily restored normal shipping conditions, leaving persistent transportation costs and geopolitical risks as potential support for oil prices.