Oil prices have fallen to a two-week low, with the Brent crude November contract dropping $2.01, or 2%, to $98.33 a barrel, and the WTI October contract losing $2.50, or 2.61%, to $93.28 a barrel. The more actively traded WTI November contract was down $2.45, or 2.65%, at $89.92 a barrel. These benchmarks reached their lowest levels since September 8. This downturn is largely attributed to reports that Iran may reopen the Strait of Hormuz within seven days, a move that could significantly increase global oil supplies, as the strait previously handled about one-fifth of global oil and liquefied natural gas supplies before the recent conflict.
Further contributing to the price drop, Saudi Arabia has restarted operations at its East-West Pipeline and is expected to resume exports from the Red Sea port of Yanbu. The pipeline, which had been shut after multiple attacks amid the conflict, is currently pumping at a low rate, but its reopening eases concerns about supply disruptions. Meanwhile, Saudi Aramco increased exports through the Strait of Hormuz, with approximately 14 million barrels of crude oil loaded onto seven supertankers on Sunday.
Despite the overall decline in oil prices, some market tightness persists. Diesel prices in Europe and the United States have reached record highs, with the national average in the US hitting $6.52 per gallon, an 82% increase since the start of the year. This is partly due to reduced exports from major producers like Russia, Saudi Arabia, and the United Arab Emirates amidst the wars in Iran and Ukraine. Ole Hansen, head of commodity strategy at Saxo Bank, suggests that significant further downside in oil prices may be limited until there's increased supply of refined products through the Strait of Hormuz, where the real crunch remains. The restart of the Saudi pipeline, while a positive sign, may take six to eight weeks to restore its pre-attack flow of around 4 million barrels per day. Freight costs for VLCC tankers have also soared, with daily earnings on a Gulf-to-China route reaching $1.2 million, and freight now making up at least 25% of the total cost of crude delivered to Asia, up from 5-6% in 2025. TotalEnergies reportedly fixed a tanker at $75 million, equivalent to $38 per barrel, with similar offers now closer to $100 million.
The falling oil prices have also had a positive impact on broader financial markets. Global stocks rallied, with the European-wide Stoxx 600 index and Germany's DAX and France's CAC 40 indexes all rising by more than 0.5%. U.S. stock futures also saw slight increases, building on strong performance from the previous day. The S&P 500 rose 0.2% and came within 0.2% of its all-time high. Additionally, bond yields fell, with the 10-year U.S. Treasury yield dropping to as low as 4.92%, easing pressure on the stock market. Companies with high fuel costs, such as Carnival (up 4%) and American Airlines (up 2.2%), saw their stock prices rise.
