Oil prices plunged more than 7% on Monday, November 2, as Washington and Tehran both signalled they would give diplomacy a chance, wiping out part of the war premium that lifted crude through October. West Texas Intermediate crude futures for December delivery settled at $96.46 a barrel on the New York Mercantile Exchange, down 7.36% from the previous session, while Brent crude futures closed at $104.77 a barrel on the London ICE Futures exchange, down 7.63%.
The Oil prices drop was the steepest one-day drop since July 27, according to reports of the settlement figures. Brent had surged to $117.64 intraday on October 30 on fears of escalating conflict in the Middle East, its highest level in six months, and crude had risen more than 10% during October on concern that the military confrontation between the United States and Iran would widen. Monday Oil prices trading reversed part of that move in a single session.
Oil prices fall on diplomacy signals
Driving the Oil prices selloff were diplomatic signals from both sides. President Donald Trump said Iran wants a deal with the United States and that an agreement could happen. Secretary of State Marco Rubio said on Saturday that no decision had been made on new strikes and that Trump prefers a diplomatic resolution. Iranian President Masoud Pezeshkian said on Monday that the Supreme Leader has granted the government certain authorities over peace talks and that Tehran will try to resolve the problem through dialogue, according to the state-run IRNA news agency.
A draft proposal on a possible end to the war is now being circulated after Iranian negotiators left Qatar, an official briefed on the talks told Reuters on Monday. Iranian Foreign Minister Abbas Araghchi said negotiators in Qatar are working on a proposal that could reopen the Strait of Hormuz in as little as two days if Washington meets a series of conditions. Tehran has demanded an end to the United States naval blockade of its ports, the lifting of oil sanctions and a halt to fighting on all regional fronts, and it is not holding direct talks with the United States, Araghchi said.
Oil prices and the Strait of Hormuz
The Strait of Hormuz, central to Oil prices, is a narrow shipping route through which a large share of the world’s seaborne crude passes, and its possible reopening was central to Monday trading. Qatar’s proposal reportedly focuses on reopening the strait, and reports said Tehran has floated reopening it within two days if Washington accepts its conditions. Whether talks lead to an actual end to the war remains uncertain, and no binding agreement or guaranteed reopening of interrupted routes had been announced at the time of reporting.
Goldman Sachs estimates that a geopolitical risk premium of about $27 a barrel accounts for most of the Oil prices rally since the conflict began. That estimate helps explain why a shift in diplomatic language, rather than a signed agreement, was enough to move the market by more than 7% in one day. Traders priced out part of the premium on the possibility of a deal, while keeping the rest in place because the outcome of talks is still unknown.
What traders watch next
On supply policy, OPEC+, the group of oil producers including Russia alongside the Organization of the Petroleum Exporting Countries, left its December production target unchanged on November 1. That decision removed one possible source of extra supply from Monday trading, so the Oil prices fall came from diplomatic news rather than from a change in producer output. Analysts cautioned that the decline reflects renewed hopes for a diplomatic breakthrough rather than a definitive resolution to the conflict.
Forecasts for the end of the year still sit close to Monday closing levels. ANZ sees Brent ending 2026 at $105 a barrel, and UBS sees it at $110, according to summaries of their forecasts. European natural gas joined the move on Monday, falling as much as 5.3% at one point, and gasoline futures posted a two-handle for the first time since August, offering some relief to consumers. Oil prices traders will now watch the Iran-Qatar mediation, any formal proposal that follows it and the language from Washington in the days ahead.