Oil Pulls Back as US-Iran Hormuz Deal Eases Supply Fear

Key Moments

Oil Prices Ease After Prior Session Surge

Oil futures retreated on Friday, giving back part of the sharp gains from the previous session, as indications that the U.S. and Iran were weighing a potential phased deal regarding the Strait of Hormuz reduced some of the market’s supply anxiety. However, a recent missile attack by Houthi forces on Saudi territory kept geopolitical risk elevated.

At 04:02 ET (08:02 GMT), benchmark Brent crude futures expiring in November were down 0.4% at $106.15 per barrel. U.S. West Texas Intermediate (WTI) crude futures traded 1.1% lower at $93.62 per barrel.

Both benchmarks had surged up to 5% during the prior session before moderating, as traders reacted first to rising security threats in Saudi Arabia and then to reports of diplomatic activity involving the U.S. and Iran.

Saudi Infrastructure in Spotlight After Houthi Missile Strikes

The latest rally in crude on Thursday followed confirmation from Saudi Arabia that it had intercepted six ballistic missiles launched by Yemen’s Iran-backed Houthi group. The missiles were reportedly aimed at locations including Taif and the Yanbu region on the Red Sea.

The incident renewed concerns about the safety of Saudi energy infrastructure and export logistics. Market participants remained focused on the kingdom’s east-west pipeline system, where earlier damage had already disrupted flows of crude to Yanbu, a key export terminal on the Red Sea. Saudi Arabia has been ramping up crude throughput toward Yanbu, but tanker loading activity at the port had not yet fully normalized.

Analysts at BMO Capital Markets wrote that Saudi crude availability worries are “re-emerging, as the restart of the East-West pipeline has yet to translate into a resumption of Red Sea exports, while Houthi attacks continue to intensify.”

Possible U.S.-Iran Path on Hormuz Cools Rally

The earlier price spike lost momentum after media accounts pointed to exploratory talks between U.S. and Iranian representatives in New York. According to those reports, the parties were discussing a gradual framework to de-escalate the conflict, which could include Tehran reopening the Strait of Hormuz in exchange for Washington rolling back its economic blockade.

Reuters reported that only 17 commodity-carrying vessels traversed the Strait of Hormuz during one recent weekend, compared with a pre-war average of about 125 vessels per day. Oil cargoes have continued to move through the chokepoint, but at diminished volumes.

U.S. Inventory Data Moderates Supply Fears

Fundamental data from the U.S. added a counterbalance to the geopolitical backdrop. Government figures for the week ended Sept. 18 showed commercial crude inventories rising by 3 million barrels, against expectations for a draw of 641,000 barrels from analysts.

At the same time, gasoline stocks declined by 1.7 million barrels, while distillate inventories, which include diesel, fell by 400,000 barrels.

Record U.S. Diesel Prices Draw Policy Attention

Diesel markets remained a focal point after U.S. diesel prices climbed to record highs. According to Reuters, the Trump administration has been evaluating ways to bolster domestic diesel availability. Energy Secretary Chris Wright has reached out to senior executives at major refining companies to test support for a voluntary curb on diesel exports, Reuters reported.