- Brent crude fell 0.8% to $114.30 amid mixed Middle East conflict signals
- US reportedly plans possible military strikes on Iran post-midterm elections
- Diplomatic talks continue between US and Iran amid uncertain negotiation outcomes
Brent crude oil prices eased on Thursday after moving away from four-year highs, as investors weighed renewed diplomatic efforts to prevent further escalation of the Middle East conflict against reports that the US was preparing for possible fresh strikes on Iran after the midterm elections.
Brent crude was last trading at $114.30 per barrel, down 0.8% on the day. However, the international benchmark had settled 1.3% higher at $115.32 a barrel on Wednesday. US West Texas Intermediate (WTI) crude futures rose 2.9% to settle at $102.78 per barrel in the previous session.
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Despite Thursday's pullback, Brent crude has gained more than 17% this month, with tensions involving Iran, Saudi Arabia and Iran-backed Houthi militants keeping concerns over regional oil supplies in focus.
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US Weighs Fresh Military Action Against Iran
The Wall Street Journal reported that the US had told several Gulf Arab countries to prepare for a short but intense military campaign against Iran after the midterm elections, citing people briefed on the conversations.
US President Donald Trump has said the war with Iran would end on his terms, while reiterating that Tehran must be prevented from acquiring nuclear weapons. Speaking at a campaign rally in Texas on Tuesday, Trump said the conflict could end quickly but stressed that any agreement must ensure Iran never obtains a nuclear weapon.
His remarks followed earlier comments that he was weighing a deal with Tehran against further military action, leaving markets uncertain about the next phase of the conflict.
Diplomatic Efforts Offer A Counterpoint
Alongside the threat of renewed strikes, investors are monitoring diplomatic efforts to prevent further escalation.
Reports suggested that US Vice President JD Vance had contacted Iranian national security official Mohsen Rezaei. Trump confirmed that negotiations were taking place through mediators, while acknowledging uncertainty over their outcome. Iranian Foreign Minister Abbas Araghchi also reiterated Tehran's openness to diplomatic solutions.
The competing signals have kept traders focused on whether diplomatic engagement can reduce the risk of further disruption to oil supplies from the region.
Houthi Attack On Saudi Oil Refinery Raises Supply Concerns
Concerns over regional energy infrastructure intensified after Iran-allied Houthi militants said on Tuesday that they had attacked Saudi Arabia's Ras Tanura refinery with a ballistic missile, according to Reuters.
The incident has added to concerns about the potential for further attacks on energy infrastructure and shipping routes in the Middle East. Continued threats to vessels passing through the Strait of Hormuz, a key route for global oil shipments, have also kept a geopolitical risk premium in crude prices.
However, energy flows from the region have since recovered to levels close to those recorded before the war, providing some counterbalance to supply disruption concerns.
Israel Election Adds To Middle East Uncertainty
Political uncertainty in Israel has added another factor for investors to monitor. Preliminary exit polls indicated that neither Prime Minister Benjamin Netanyahu nor his main challenger, Gadi Eisenkot, had secured a clear path to a governing majority.
The rival blocs were projected to fall short of the 61 seats needed to control Israel's 120-member parliament, raising the prospect of prolonged coalition negotiations.
The political deadlock could complicate the outlook for Israel's approach towards Iran, adding to the uncertainty surrounding the wider regional conflict.
What Investors Are Watching
Crude oil prices remain sensitive to developments on both the diplomatic and military fronts. Investors are monitoring the possibility of fresh US strikes on Iran, the progress of negotiations, threats to Saudi energy infrastructure and the security of shipping through the Strait of Hormuz.
Any escalation that disrupts regional oil production or transport could intensify supply concerns, while progress towards a diplomatic settlement could ease some of the risk premium embedded in prices.
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