Oil Prices Slip 0.9% on Geopolitical Tensions

Oil Prices Slip 0.9% on Geopolitical Tensions

Oil prices fell on Wednesday, extending weekly declines, after diplomatic hopes in the Middle East and renewed Russia‑Ukraine tensions. Brent crude futures for November settled 0.9% lower at $86.47 a barrel, while U.S. West Texas Intermediate (WTI) October contracts fell 0.6% to $81.83 a barrel.

Bloomberg reported that Russia was preparing to intensify conventional ballistic missile attacks on Kyiv, citing three sources close to the Kremlin, and that some Russian officials believed President Vladimir Putin might consider using tactical nuclear weapons as a last resort. The war, now over four years old, sees Russia occupying roughly 20% of Ukrainian territory, while Kyiv’s recent long‑range drone strikes have damaged up to 40% of Russia’s refining capacity and logistics hubs, including those operated by e‑commerce giant Wildberries.

In the Middle East, oil prices slumped more than 5% on Tuesday after Russian state‑owned RIA Novosti cited Pakistani and Iranian sources saying the United States and Iran were close to a fresh cease‑fire deal that would allow free navigation through the Strait of Hormuz. Pakistani officials confirmed progress in mediation talks with Iran and discussed restoring an interim cease‑fire framework signed in June. Separately, Al Jazeera reported that Iran and Oman had agreed on a temporary shipping route through the strait, though a top Iranian official warned full reopening would await U.S. compliance with commitments made in the June framework deal.

Analysts at Vital Knowledge warned that a geopolitical risk factor will be permanently embedded in oil prices. ING analysts added that the Iran‑Oman agreement does not guarantee normalization of oil flows through the chokepoint; the United States would need to lift its blockade on Iranian ports and ease sanctions before any substantive move toward normalization.

Tanker traffic through the Strait of Hormuz has dwindled to a trickle, with preliminary data from Kpler (cited by CNBC) showing only five commodity ships transited on Tuesday, well below the 10‑day moving average of 15. Prior to the war’s onset in late February, roughly one‑fifth of global oil and liquefied natural gas passed through the channel. The diplomatic developments come a day after the United States imposed stricter economic sanctions on Tehran, signalling a preference for economic pressure over military action.

The article was contributed by Ambar Warrick and Scott Kanowsky.