Oil rebounds as markets weigh Iran diplomacy

Oil prices edged higher on Tuesday, snapping a four-session decline as traders balanced persistent Middle East supply risks against the possibility of diplomatic contacts between the United States and Iran during the United Nations General Assembly in New York.

Brent crude futures for November rose $1.14 to $101.48 a barrel in early trading, while US West Texas Intermediate for October gained 87 cents to $96.65. The more actively traded November WTI contract climbed 85 cents to $93.22. Brent had fallen by almost 8 per cent over the previous four sessions, bringing prices back towards levels seen before the latest escalation in regional supply concerns.

Market attention centred on President Donald Trump’s appearance at the General Assembly later on Tuesday and the prospect of contact with Iranian President Masoud Pezeshkian. Trump has said he would be open to meeting Pezeshkian, who is expected in New York for the annual gathering, but no bilateral meeting had been formally announced. The uncertainty left traders reluctant to assume that diplomacy would quickly translate into lower geopolitical risk.

The General Assembly’s high-level debate opened on Tuesday and runs through September 28. Any direct engagement between Washington and Tehran would come as investors assess whether political talks can reduce threats to oil infrastructure, shipping routes and regional exports that have kept a substantial risk premium embedded in crude prices.

Supply conditions have nevertheless shown signs of improvement. Saudi crude exports have strengthened despite disruption to the kingdom’s East-West pipeline, while oil shipments through the Strait of Hormuz have increased from earlier lows. Those developments helped drive the four-day sell-off, easing immediate fears that physical shortages would worsen as fighting and attacks continued across the region.

Tensions remain elevated. Yemen’s Iran-aligned Houthi movement has claimed attacks on targets in Saudi Arabia, including sites linked to the energy sector, while Riyadh has said some attacks were intercepted. The continuing security threat means traders are still watching the Red Sea, Saudi export infrastructure and the Strait of Hormuz for signs that renewed disruption could reverse the decline in prices.

Tuesday’s rebound was also viewed cautiously because part of the move appeared to reflect traders buying back short positions after the sharp fall rather than a clear change in the supply outlook. The market has been highly sensitive to headlines about negotiations, military developments and tanker movements, producing large swings in both Brent and WTI.

Another focus is the scheduled visit of Chinese President Xi Jinping to Washington. The White House said Xi will be welcomed for an official state visit on Thursday, with Trump and Xi expected to discuss a wide range of issues. Trade, technology, Taiwan and the Iran conflict are among the matters likely to figure in the talks, which markets are watching for any implications for energy demand, sanctions and geopolitical risk.

China is the world’s largest crude importer, making its economic outlook and relations with Washington important for oil markets. Any easing of trade tensions could improve expectations for global demand, while disputes over sanctions or Middle East policy could have the opposite effect. Traders are therefore assessing the Trump-Xi meeting alongside the more immediate question of whether US-Iran diplomacy produces tangible progress.

Oil’s retreat over the previous four sessions had also eased some concern about inflationary pressure after crude prices climbed sharply during the conflict. Higher energy costs have complicated the outlook for central banks and import-dependent economies, while lower crude prices can reduce transport and production costs if the decline is sustained.