Oil Prices Fell More Than 6% as Iran Diplomacy Gathers Pace

Economic Warfare & Trade Policy › Energy & commodities

Oil prices fell sharply on Monday, Oct. 26, 2026, as diplomacy over the Iran war picked up: Qatari mediators reached Tehran on Sunday and senior Saudi, Pakistani and Turkish security officials arrived Monday for de-escalation talks. Brent crude, the global benchmark, dropped more than 6% from Friday’s close of about $117.40 a barrel to around $110 by late morning in Europe, Euronews reported.

The slide came in stages. Early in Asian trading, CNBC reported Brent down 1.89% at $114.51 and U.S. West Texas Intermediate (WTI) down 2.19% at about $101. As word of the Tehran meetings spread, Brent extended its losses while WTI held near $101.50, according to Euronews.

Why oil prices fell on Monday

Friday’s close was Brent’s highest since March 19 and only about 2% below the $119.50 peak hit in early March, at the start of the war, according to Euronews. Before the conflict began on Feb. 28, Brent traded near $72.

Two things shifted over the weekend. First, mediators moved. Qatari envoys traveled to Tehran on Sunday in coordination with Washington, and Saudi Defense Minister Prince Khalid bin Salman, Pakistani army chief Field Marshal Asim Munir and Turkish intelligence chief Ibrahim Kalin were due Monday for talks with Iranian President Masoud Pezeshkian. Second, President Donald Trump framed his options in a Fox News interview on Sunday as “do I make a deal with them, or do I finish them off?”. Our Iran war update from Oct. 25 covers the weekend’s signals in more detail.

Houthi attacks on Saudi Arabia keep supply risk high

The risk premium has not gone away. Last week’s rally followed attacks by Yemen’s Iran-aligned Houthis on Saudi airports and energy facilities. Over the weekend, the Houthis said they targeted Riyadh’s main airport and oil facilities on Saturday !Unverified claim, Houthi statements (Houthi movement), while Saudi authorities said Sunday they intercepted more missiles and drones. Saudi Arabia partially reopened the Riyadh airport on Sunday despite damage from earlier attacks, CNBC reported. Reuters, citing aviation data, said about 86% of scheduled flights at Riyadh’s King Khalid International Airport, 4,071 of 4,736, were cancelled between Oct. 8 and Oct. 25.

Michael Alfaro, chief investment officer at Gallo Partners, told CNBC that geopolitical uncertainty had added roughly $20 a barrel to prices. He said a major strike on Saudi Arabia’s East-West pipeline or more refining sites could send Brent sharply higher, but that prices of $120 to $140 would start to destroy demand. “The real challenge is refining capacity,” he said, warning of a structural problem that could last into 2027. For background on last week’s run-up, see our report on Strait of Hormuz tanker attacks that pushed Brent above $117.

Hormuz flows, U.S. reserves and fuel prices

At a campaign rally in Port Huron, Michigan, Trump said oil coming out of the Strait of Hormuz “is now topping what it was before the war,” citing The Wall Street Journal. Ship-tracking firm Kpler data cited by Euronews show Gulf crude exports excluding Iran returned to pre-war levels in September, but about 40% now bypass the strait by pipeline, up from 17% before the conflict. The strait carried about a fifth of the world’s oil before the war.

In Washington, the Department of Energy on Oct. 23 authorized an emergency exchange of up to 400,000 barrels from the Strategic Petroleum Reserve’s West Hackberry site to the Phillips 66 refinery in Lake Charles, Louisiana, to offset a crude delivery disruption. Under the exchange, Phillips 66 must return the oil plus extra premium barrels, the department said. CNBC reported that U.S. producers remain cautious about major new drilling investment despite high prices. New England readers can find local help in our guide to Boston heating assistance for winter 2026-27.

A heavy week for markets

European stocks rose Monday, with the Stoxx 600 and Euro Stoxx 50 up more than 0.6% and S&P 500 futures 0.3% higher, Euronews reported. The Federal Reserve announces its rate decision Wednesday and is widely expected to hold at 3.75% to 4%, followed by the European Central Bank on Thursday and the Bank of Japan on Friday. Alphabet, Microsoft and Amazon report earnings this week, along with BP and Shell in Europe.

For oil, the next moves depend on whether the Tehran talks produce anything concrete, and on whether Houthi strikes on Saudi infrastructure continue. A deal would likely pull more of the war premium out of prices; a renewed U.S. or Israeli strike on Iran, which U.S. media report is being planned for after the midterms, would push it back in.

Sources

• Euronews: Oil plunges more than 6% from near wartime highs as diplomacy over Iran gathers pace
• CNBC: Oil slides over 2% as traders weigh Saudi attack risks, demand destruction
• U.S. Department of Energy: Energy Department authorizes Strategic Petroleum Reserve exchange
• Reuters (via StreetInsider): Oct. 26 news summaries, including Riyadh flight cancellations

Additional sources

• Arab News: Saudi defense minister leads delegation to Makkah pact meeting with Iran
• Al Jazeera: CENTCOM reportedly has plans for Iran strikes