Oil prices slide as hopes rise for potential US-Iran diplomatic breakthrough

Oil prices took a leg down on Monday as the outlook for potential diplomatic breakthroughs in the Middle East strengthened just a day before midterm elections that could represent a pivotal moment for the Iran war.

Futures on Brent crude ( BZ=F ), the international benchmark, shed around 7.9% to trade below $105 per barrel, while those on US WTI crude ( CL=F ) lost 7.5% to hold near $96.

Oil futures initially began to move downward on Monday after Axios reported that, while Israeli Prime Minister Benjamin Netanyahu has pressed the White House for a forceful round of strikes on Iran, President Trump has said he wants to give diplomacy with Tehran another shot .

The reporting from Axios aligns with public statements in recent days from President Trump, where he has said the US won't strike Iran after the midterms. However, reporting by national outlets in recent weeks has indicated that the US military has briefed Trump on options for a major reescalation after the midterms, when the risk of political backlash against the president will be lessened.

Adding to the downward pressure on oil prices Monday, leaders in Tehran said contact with the US over negotiations to end the war is continuing , Reuters reported, as talks between Iran and Qatari mediators have produced proposal language but no breakthrough agreement.

"Consultations through mediators are very intensive," Iranian Foreign Minister Abbas Araghchi said in comments to the state-run media outlet IRNA. "We have ‌presented our conditions and proposals and everything depends on the political rationality of Washington."

Leaders in China and Russia both spoke out against a full-fledged resumption of hostilities on Monday, in comments from their foreign ministries. China is a major buyer of energy from the Gulf region, and after largely staying out of the conflict through its first several months, it has engaged more directly in recent weeks.

In Russia, the war in Iran has added to the nation's domestic fuel shortage, caused largely by strikes on oil refineries by the Ukrainian military and international sanctions levied against Moscow. President Vladimir Putin reportedly spoke with Iranian security lead official Mohsen Rezaei on Monday , per Reuters.

Even so, the diplomatic headlines haven't yet tempered predictions on Wall Street that oil prices will remain higher for longer. Goldman Sachs analysts led by Daan Struyven said on Monday that they now expect Brent prices to average $105 per barrel in December, up from a previous forecast of $90. They see Brent contracts averaging $88 per barrel in 2027, up from a prior $80 forecast.