Oil prices experienced a decline on Thursday following a 4% increase in the prior session. This shift comes as Iran indicated its willingness to engage in diplomatic efforts to resolve its conflict with the United States, despite ongoing divisions between the two parties regarding the path to an agreement. Iran and the United States continue to diverge in their approaches to resolving the conflict. The remarks followed Iranian President Masoud Pezeshkian’s address to the UN General Assembly, in which he asserted that Tehran would never capitulate to US pressure. Brent crude futures decreased by 94 cents, representing a 0.9% drop, settling at $102.13 per barrel. In a similar vein, West Texas Intermediate futures saw a decline of 59 cents, or 0.7%, reaching $91.56. Tehran was assessing Washington’s reply to its peace proposals, which advocate for the removal of a US naval blockade on Iranian ports and the reopening of the Strait of Hormuz, according to sources. The two issues were addressed during indirect discussions on Tuesday.

Earlier on Wednesday, Iran’s security chief Mohsen Rezaei stated that the Strait of Hormuz would remain closed until Iran’s conditions were fulfilled. US Secretary of State Marco Rubio stated on Wednesday that achieving an agreement with Iran would necessitate diligent effort over an extended timeframe. He also stated that US President Donald Trump possessed military options. A day earlier, Trump stated, “I think there’s a lot of momentum for them to make a deal.” Furthermore, operations on Saudi Arabia’s East-West Pipeline to the Red Sea were resumed on Tuesday, according to three sources familiar with the situation, indicating a potential uptick in Middle Eastern oil flows. The pipeline was closed on September 11 following drone attacks, which Saudi Arabia attributed to Iraqi militia, disrupting crude loadings at the kingdom’s Yanbu port.

Prior to the disruption, Saudi Arabia utilised the pipeline to redirect approximately 4 million barrels per day, equating to about 4% of global supply, to Yanbu following the US-Israeli conflict with Iran, which interrupted oil flows from Saudi Arabia and other Gulf producers via the Strait of Hormuz. Iraq is also increasing its oil exports, as stated by Oil Minister Basim Mohammed on Tuesday. The country is currently exporting more than 3 million barrels per day and anticipates that shipments via Turkey will increase to over 600,000 barrels per day. JPMorgan, in the current climate, has experienced a decline in clarity regarding the trajectory of oil prices. For the first time since the onset of the Iran war in February, the Wall Street bank finds itself without a definitive baseline scenario for the oil market, as rising tensions exacerbate worries surrounding an already deteriorating supply shock.

We simply don’t know how to model the endgame,” JPMorgan analysts stated, emphasising the ambiguity surrounding the potential evolution of the conflict. At the onset of the conflict, the bank had presumed that there existed specific economic thresholds that the US administration would refrain from surpassing. Six months into the war, however, many of those lines have been crossed, while there is still no clear exit strategy, JPMorgan stated. JPMorgan stated on Thursday that it lacks a definitive baseline perspective on oil markets for the first time since the onset of the US-Israeli conflict regarding Iran, underscoring the prevailing uncertainty facing the market. The potential for additional supply disruptions has progressively elevated the oil price forecast. Daan Struyven stated that recent attacks have demonstrated the potential for disruptions to shipping to proliferate and intensify.

Goldman Sachs has delineated a scenario where oil prices might escalate to $120 a barrel should assaults on vessels in the Middle East become more pronounced. If exports return to normal, the bank anticipates that oil prices will trend back toward $80 a barrel. Struyven indicated to Bloomberg that shipping risks have emerged as a significant factor influencing oil prices. Goldman Sachs anticipates “meaningful upside to crude oil prices” and projects an increase in natural gas and refined product prices as well. He noted that supply shocks in petrol and fuels are more significant than those observed in the crude market.