US and Iran Show 'Willingness to Negotiate', Causing Global Energy Prices to Plummet

International oil prices on Monday recorded the largest single-day decline in nearly three months, as both the US and Iran conveyed willingness to negotiate through official channels, causing the significant geopolitical risk premium that had built up over the Strait of Hormuz tensions to rapidly retreat.

According to an article from WallstreetCN, Trump is inclined to give more time for diplomatic mediation with Iran and postpone a new round of military action.

Media reports stated that he said in his speech that day, "They want to reach an agreement, which is possible," and when pressed about whether military strikes against Iran would resume after the midterm elections, he replied directly, "No." US Vice President JD Vance later stated, "We’ve had several good talks with the Iranians," and "Both the President and I are quite optimistic about the prospects for a negotiated solution."

Such statements drove Brent crude oil futures to plummet more than 6% on Monday, at one point falling to around $103/barrel intraday, while WTI futures fell more than 8.6% at one stage, dipping to as low as $95.15/barrel, breaking below the psychological $100 mark, and ultimately settled near $97. European benchmark natural gas futures at one point slumped nearly 11% intraday, and US heating oil futures also registered their biggest single-day drop in six months, putting broad pressure across the energy markets.

However, the WallstreetCN article also noted that Iran’s Fars news agency, citing insiders, reported that information exchanges between the US and Iran via intermediaries are standard practice, with no new progress on either side. The Strait of Hormuz remains completely under Iranian military control. The uncertainty in diplomatic prospects caused US stocks to fluctuate at midday, with the Nasdaq 100 Index falling nearly 0.9% intraday, though the downward trend in oil prices remained unchanged.

Simultaneous Diplomatic Signals Trigger Significant Market Repricing

The immediate trigger for this round of sharp oil price drop originated from the closely timed signals of willingness to negotiate from both the US and Iran.

According to reports from CCTV News citing Iran’s official news agency, Pezeshkian clearly stated on Monday that Iran’s Supreme Leader had authorized the government to take action regarding peace talks. During his visit to Turkmenistan, Iranian Foreign Minister Abbas Araghchi also told the Islamic Republic News Agency (IRNA), "Given the high sensitivity of the current situation, consultations and negotiations have become extremely intensive," and noted, "We have put forward our conditions and proposals; everything now depends on the political rationality of Washington."

The US also simultaneously sent out signals of easing tension. US Secretary of State Marco Rubio said last Saturday that no decision had been made yet on whether to launch a new round of strikes on Iran, and Trump prefers to resolve the problem through diplomatic channels. Trump later posted on social media:

"Oil prices dropped like a rock today, down nearly $10 a barrel, a record fall, because people feel that there will not be a war with Iran."

UBS market analyst Nana Antiedu wrote in a briefing, "As expectations for diplomatic progress warm up, the geopolitical premium that had been built into the October oil rally has eased", and pointed out that Iranian and Qatari officials have held three consecutive days of talks on ending the conflict with the US and Israel.

Darrell Fletcher, Managing Director of Commodities at Bannockburn Capital Markets, said, "A substantial amount of risk premium is evaporating from crude oil and European natural gas."

Technical factors also amplified the oil price drop this time. According to data from Bridgeton Research Group under Kpler, the ratio of long positions held by trend-following commodity trading advisors (CTAs) in Brent crude oil fell sharply from 100% at the market open to 91% that day. Such algorithmic traders are known for amplifying price volatility.

Iran Sets Terms for Reopening the Strait, Deep Divisions Persist

Although diplomatic signals sparked a strong market reaction, substantive progress in negotiations remains limited, with significant differences persisting between the core demands of both sides.

According to CCTV reports, Iranian Foreign Minister Araghchi said that the current proposal on the negotiating table is basically the same as the "Seven-Day Plan" previously put forward by Iran. This plan clearly outlines the conditions for Iran to reopen the Strait of Hormuz: If Iran’s conditions are met, the Strait of Hormuz will open on the sixth day, and US-Iran negotiations will officially resume on the seventh day. Mediators from Qatar, Pakistan and others have held multiple rounds of negotiations on this proposal and have also put forward more feasible suggestions than the "Seven-Day Plan".

According to CCTV International News, Iranian Foreign Ministry spokesperson Baqaei said Monday that the Secretary of Iran’s Supreme National Security Council will decide how to respond to the US letter based on national interests. Baqaei also emphasized that all indirect talks between Iran and the US, facilitated by mediators, are mainly based on the Iranian-proposed "Seven-Day Plan", which has been streamlined to allow full implementation within two days, "demonstrating Iran’s goodwill and constructive attitude." He added, "Only under this premise can we discuss arrangements for the later stages."

However, the WallstreetCN article reported, citing Fars news agency sources, that exchanges via intermediaries remain routine with no new progress; the Iranian side stressed that no new developments or actions will occur before the US implements Iran’s seven conditions. The source also claimed that the Strait of Hormuz remains fully under Iranian military control, and no US warship even dares to come within hundreds of kilometers of the strait.

Ali Vaez, Director of the Iran Project and Senior Analyst at International Crisis Group, pointed out, "There is nothing new here. The Supreme Leader has given the government a limited mandate to negotiate with clear red lines," and "Tehran is willing to negotiate to end the war, but it wants more than just a pause before the next round of conflict, it wants a lasting peace that can restore its deterrence."

Behind Iran’s tough statements, reports indicate that Supreme Leader Khamenei has ordered senior military commanders to prepare for a new round of confrontation with the US and Israel, and to expand Tehran’s options for retaliation, which stands in stark contrast to the diplomatic progress signaled by its top diplomat.

Israel Pressures, Midterm Elections Loom—Uncertainty Clouds Negotiations’ Outlook

The complexity of this round of diplomatic maneuvering is further highlighted by Israel’s hardline stance and the approaching US midterm election timeline.

Citing Israeli media via CCTV News, Trump and Israeli Prime Minister Netanyahu held a "direct and sharp" call on October 31. Sources said that Netanyahu urged Trump to "immediately resume the war against Iran" after the November 3 midterm elections ended, and expressed concern over the US-Iran negotiations currently being mediated in Qatar. At this stage, Trump prefers to "let the negotiations fully unfold" and does not want Israel to interfere in the negotiation process. Sources revealed that if negotiations fail, Trump’s stance may "change significantly."

Meanwhile, high oil prices have put pressure on the ruling Republican Party’s election prospects, giving Trump greater short-term political motivation for his diplomatic statements. Monday’s oil price crash took WTI futures below the $100 psychological level, with less than 24 hours left to Tuesday’s polling day—but analysts pointed out that for consumers who have suffered from high oil prices for a long time, this price drop has come too late.

Supply Buffers Depleted Quickly, Fundamental Pressure Unresolved

While diplomatic signals pushed oil prices to retreat sharply, structural pressures on global oil supply have not eased, with analysts warning that the downside for oil prices may be quite limited.

Sultan Al Jaber, CEO of Abu Dhabi National Oil Company (ADNOC), stated that since the obstruction of shipping through the Strait of Hormuz, global oil inventories have cumulatively decreased by nearly one billion barrels. Diesel inventories in some markets have dropped to their lowest seasonal levels in 35 years, while the share of shipping and logistics costs in the per barrel oil cost has surged from around 5% to 30%.

Goldman Sachs analysts previously raised their December Brent crude forecast to $105 per barrel, and expect the annual average for next year to be $88. Goldman Sachs noted in its report, "The situation in the Middle East, the Russia-Ukraine conflict, and broader geopolitical fragmentation together constitute a high risk of supply disruptions."