Oil prices gained slightly on Tuesday following a sharp drop in the previous session as reports emerged that the United States had carried out a strike on Iran’s Qeshm Island, fuelling concerns over a possible escalation of the eight-month conflict and prolonged disruptions to oil supplies from the Middle East.
The Wall Street Journal reported, citing US officials, that the United States had struck Iran’s Qeshm Island. Some officials described the attacks as defensive operations aimed at preventing Iran from freely targeting commercial vessels in the Strait of Hormuz.
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Crude oil price on November 3
Brent crude futures rose 11 cents, or 0.12%, to $105 a barrel, while US West Texas Intermediate (WTI) crude rose 26 cents, or 0.27%, to $97 a barrel. In the previous session, Brent crude futures had settled $8.66, or 7.63%, lower at $104.77 a barrel. Brent crude ended October at its highest level in six months, amid concerns that tensions in the Middle East could intensify again following Tuesday’s US midterm elections.
The report brought a fresh risk premium into oil prices after markets had begun factoring in the possibility of a diplomatic resolution, said Tim Waterer, chief market analyst at KCM Trade. He added that news of continued military activity had shifted market sentiment.
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Meanwhile, Tehran said on Monday that discussions with the United States to end the conflict were continuing. This came after several days of talks between Iran and Qatari mediators concluded with revised proposals but failed to produce a breakthrough. Iranian President Masoud Pezeshkian said Supreme Leader Ayatollah Mojtaba Khamenei had granted the government certain powers to pursue peace negotiations.US President Donald Trump also cast doubt on Monday over whether he would carry out his threat to resume military strikes against Iran, while indicating that a deal with Tehran remained possible.
The conflict between the US and Iran, which began in late February, has significantly curtailed shipping traffic through the Strait of Hormuz. The waterway previously handled around a fifth of global crude oil and natural gas supplies.
Separately, the United States will host delegations from Ukraine and Russia in Abu Dhabi on November 10-11 for discussions on ending Moscow’s war against Ukraine, post-war security arrangements and de-escalation.
Where are prices headed?
Goldman Sachs has revised its oil price forecasts upwards, citing heightened risks to global supply, and warned that Brent crude could climb to $140 a barrel in 2027 if oil production in the Gulf region remains significantly below its 2025 average. The investment bank raised its December Brent crude price forecast to $105 a barrel from $90 earlier. Its projection for US West Texas Intermediate (WTI) crude was also increased to $94 a barrel from $81.
In an upside scenario, Brent crude could reach $140 a barrel and average around $130 in 2027 if Gulf oil production remains 3.5 million barrels per day below its 2025 average, Reuters reported, citing Goldman Sachs’ projections.
The bank expects oil markets to price in a higher geopolitical risk premium, taking into account the possibility of disruptions to Middle East supplies, the historical duration of major supply shocks and concerns that a lasting diplomatic breakthrough may be difficult to secure.
Meanwhile, uncertainty surrounding the course of the conflict continues to cloud the oil price outlook. JPMorgan analysts said it remained difficult to assess how the war would unfold. At the beginning of the conflict, the bank had expected the US administration to avoid crossing certain economic thresholds. However, seven months later, several of those limits had been breached, with no clear strategy for bringing the conflict to an end.
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