Oil Falls for Second Day, With WTI Near $101 as US-Iran Escalation Fears Ease

Oil fell for a second straight day as diplomatic efforts continued to ease military tensions between the US and Iran.

According to Bloomberg on October 26, West Texas Intermediate crude dropped to around $101 a barrel after falling 1.5% in the previous session. Brent crude, the international benchmark, also traded below $116 a barrel.

The decline was driven in part by diplomatic mediation efforts by key Middle Eastern countries. Senior officials from Saudi Arabia, Pakistan and Turkiye visited Tehran the previous day to discuss ways to ease tensions. Iran's state broadcaster IRIB said the countries agreed to continue consultations.

Russia is also stepping up its diplomacy related to the Middle East situation. President Vladimir Putin is scheduled to meet separately in Moscow on October 26 with Iranian President Masoud Pezeshkian and Qatar's Emir Sheikh Tamim bin Hamad Al Thani on the sidelines of an energy summit.

Military risks in the Middle East remain high. The Saudi-led coalition said it shot down three drones over the capital, Riyadh. Lebanon's Hezbollah is also reported to be preparing for a new regional war with financial support from Iran.

Brent crude prices have surged about 90% this year. The rise reflects disruptions to energy supply chains caused by the war between the US and Iran, as well as continued attacks by Yemen's Houthi rebels that have heightened concerns over crude supplies.

Markets are also watching major political and economic events. Israel's general election is scheduled for October 27, followed later this week by the Federal Reserve's monetary policy decision and by the US midterm elections on November 3.

The Fed raised interest rates last month for the first time since 2023 in response to inflation pressures. More recently, however, Fed officials have signaled they are not in a hurry to deliver additional rate increases despite rising energy prices.