Oil Futures Settle Lower in Volatile Session — 4th Update

By Farhan Rafid and Anthony Harrup

Oil futures settled lower Tuesday in a volatile session that saw prices reach multimonth highs before pulling back as traders considered prospects for U.S.-Iran diplomacy amid continuing Middle East supply risks.

Brent crude for December delivery fell 0.7% to $108.79 a barrel, and December West Texas Intermediate crude settled down 0.7% at $97.82 a barrel.

Both benchmarks had risen earlier in the session, with December WTI climbing above $100 a barrel as investors assessed attacks on shipping through the Strait of Hormuz and Houthi strikes on Saudi Arabia.

"This is the kind of volatility you get when geopolitical events pile up on top of each other," said Robert Yawger, commodity specialist at Mizuho Securities USA.

There was "no smoking-gun headline" prompting the move lower in oil, he added. "I don't see anybody putting forward a peace deal. I don't see any bearish geopolitical events."

A U.S.-Iran agreement before the U.S. midterm elections in two weeks appears increasingly difficult, analysts at Deutsche Bank said. Investors are also concerned that Washington could escalate tensions with Tehran after the elections, as increased Iranian attacks in the Strait of Hormuz have slowed the recovery in oil flows, they said.

"Diplomatic efforts continue but we regard a negotiated solution that takes us back to the prewar supply and spare capacity level in the Middle East as a remote possibility at this time," Amarpreet Singh of Barclays said in a note.

Despite relatively strong crude flows from the Persian Gulf, oil prices remain supported by a significant geopolitical risk premium, analysts at ING said Tuesday. The premium could gradually ease if shipments continue without further disruptions, but there are no signs of that happening yet, they said.

Record tanker freight rates are also adding to transportation costs, according to ING. Allowing sanctioned tankers into the regular shipping market could help lower freight rates, although the amount of additional capacity and how quickly it could become available remain uncertain, the bank said.

Risks to Middle East supplies also persist. Iran has been providing Yemen's Houthi militia with intelligence and targeting assistance for attacks on Saudi Arabia, The Wall Street Journal reported. U.K. Maritime Trade Operations separately reported an attack on a tugboat near the United Arab Emirates Sunday, following attacks on two tankers off Saudi Arabia Friday.

Meanwhile, the Saudi-led coalition said Tuesday that it intercepted and destroyed a ballistic missile launched by Yemen's Iran-backed Houthi militia toward Riyadh.

Efforts to support oil flows through the Strait of Hormuz may fall short of stabilizing fuel markets as supply risks in the Middle East increase, analysts at ANZ Research said Tuesday.

Tuesday's expiration of the WTI November contract added to the volatility in an illiquid market, said Mizuho's Yawger. "The market is all over the place trying to get out ahead of the expiration."

November WTI went off the board at $101.79 a barrel, down 1.8%, after rising as high as $110.48 earlier in the session.

Write to Farhan Rafid at farhan.rafid@wsj.com and Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

October 20, 2026 16:24 ET (20:24 GMT)