Brent Plunges 3%, Retreats To $87 As US 'Sending Diplomats' Back To Gulf Calms Oil Market

Brent crude futures dropped nearly 3% on Tuesday to around $87 a barrel after The New York Times reported that the US could begin returning evacuated diplomats to several Middle Eastern embassies, easing fears of a fresh escalation in the region.

Brent futures were trading 2.92% lower at $87.90 a barrel as markets digested the report, which cited an internal State Department document and three US officials familiar with the matter.

The NYT reported that evacuated US foreign service officers could start returning to their posts as early as this week, suggesting that the Trump administration does not foresee a renewed outbreak of full-scale hostilities with Iran.

The planned restaffing covers US diplomatic missions in Israel, Lebanon, Saudi Arabia, Qatar, Jordan, Oman, Iraq and Kuwait, according to the document cited by the newspaper.

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The US Embassy in Beirut is expected to be the first to see staff return.

The development has reduced the geopolitical risk premium in oil markets, with traders viewing the potential return of diplomats as an indication that Washington sees the immediate threat of a wider regional conflict as having eased.

The move comes despite stalled talks between the US and Iran and the Trump administration's threat of fresh economic sanctions against Tehran.

The State Department confirmed it was adjusting staffing levels at certain Middle Eastern posts based on its latest security assessment, while stressing that the safety of US personnel remained a priority.

With fears of renewed conflict easing, oil markets are likely to remain sensitive to further developments in US-Iran relations and any changes in regional security conditions.

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