Breaking: Oil Drops 6% as WTI Falls Below $98, Gold Jumps 2% on Iran Talks

Oil extended its losses around the US market open. Trading Economics showed WTI crude most recently near $97.41, down about 6.4% from Friday, and Brent near $106.20, down about 6.4%. This is in line with IBTimes, which reported (9:26 a.m. ET, or around 14:26 GMT) that Brent had tumbled about 6% to below $107, compared with a drop of about 4% in the first version of this story.

The new catalyst was Iranian President Masoud Pezeshkian saying the Supreme Leader had granted the government “certain authorities” to negotiate with the US, according to investingLive citing Iran’s state-run ISNA news agency, while IBTimes, citing Iranian state media, reported that Tehran wants to end the war with the US without returning to full-scale fighting. However, no deal has been confirmed and the US has not yet accepted Iran’s conditions.

Spot gold (XAUUSD) rebounded strongly. Kitco reported early in the US session that spot gold was up 1.80% at around $3,945.70, and Trading Economics most recently showed it near $3,961, up about 2.2%. Support came from buying back after heavy losses in October, lower yields and cheaper oil, which eases inflation concerns. However, Kitco noted that markets still price about a 75% chance of a Fed rate hike by year-end, which could cap gold’s gains.

Crude oil prices fell sharply from early Monday in Asian trading and stayed in negative territory into the European session. AP reported (updated 8:03 a.m. New York time, or around 13:03 GMT) that Brent was down 4.2% at $108.68 a barrel and US WTI crude was down 4.2% at $99.74 a barrel, while Trading Economics showed WTI last near $99.51, down about 4.4% from Friday.

Prices were pressured by hopes that the US–Iran conflict could be resolved diplomatically. The National, citing an Axios report, said President Trump told Israeli Prime Minister Netanyahu he wants to give diplomacy with Tehran more time before considering further strikes. Euronews reported that Iranian Foreign Minister Abbas Araghchi said a plan being discussed through mediators in Qatar could reopen the Strait of Hormuz within just 2 days if Washington accepts several conditions, while stressing there are no direct negotiations with the US.

The Strait of Hormuz is one of the world’s key oil shipping routes, and its closure has kept oil prices elevated throughout. AP noted that a year ago Brent was only around $65 and WTI around $61. High oil prices are one reason markets worry about inflation and expect the Fed may need to raise rates, so any news that pushes oil lower is being watched for how much it could ease inflation pressure.

As of around 13:45 GMT, the reaction in other markets was still limited: the US 10-year Treasury yield was near 4.92%, down about 1bp, the dollar (DXY) was down about 0.2%, spot gold (XAUUSD) had rebounded about 1% to around $3,915 after hitting a 1-year low on Friday, and US stock futures were higher.

Uncertainty remains high. Euronews reported that Trump said on Saturday night the talks were “going well” but that the Iranian side was “not very reliable”, and he has not ruled out military options. If talks stall, oil prices could become highly volatile again. OPEC+ has also kept its output targets unchanged through December.

Today at 15:00 GMT brings US ISM manufacturing, whose prices-paid index reflects energy costs. Tomorrow (Tue 3 Nov) brings the US midterm elections and the RBA decision at 03:30 GMT. See the full week’s schedule in our economic calendar