Oil Prices Fall About 2% as US and Iran Explore Path Toward Ending War

US, Sep 26 : Oil prices declined around 2% on Friday as growing expectations of a possible truce between the United States and Iran eased concerns over prolonged disruption to Middle Eastern energy supplies. Market sentiment was also influenced by discussion of a potential US ban on diesel exports, while traders remained alert to attacks on Saudi Arabia by Yemen’s Iran aligned Houthi fighters.

Brent crude futures settled $2.28, or 2.1%, lower at $104.32 a barrel, while US West Texas Intermediate (WTI) crude fell $2.20, or 2.3%, to $92.41 a barrel.

For the week, Brent gained less than 1%, while WTI declined by about 8%.

US and Iranian negotiators in New York are reportedly examining a phased route towards ending the conflict. According to sources familiar with the discussions, a potential arrangement could involve Iran reopening the Strait of Hormuz and the United States easing its economic blockade of Tehran.

Iran, however, has indicated that it would not compromise on its nuclear programme. A senior Iranian official told Reuters that Tehran’s position would remain unchanged even if Washington accepted an Iranian proposal to reopen the strategic waterway, which includes measures such as lifting the US naval blockade on Iranian ports.

Analysts at energy advisory firm Ritterbusch and Associates said oil markets were facing renewed pressure as traders assessed both the possibility of a US diesel export restriction and reports of diplomatic progress that could facilitate the reopening of the Strait of Hormuz.

The prospect of a diesel export ban has also affected the relationship between US and international crude benchmarks. Traders expect such a measure could leave US refiners with additional diesel supplies, potentially reducing the amount of crude they process.

The premium of Brent over WTI rose to its highest level since May for a third consecutive day. US gasoline futures also fell by about 4% on Friday.

Concerns Over Saudi Oil Supplies

Despite the diplomatic developments, concerns over supply disruption remain. Military chiefs from Saudi Arabia, Türkiye and Pakistan are expected to discuss assistance for Riyadh as Saudi Arabia faces attacks from Yemen’s Iran-aligned Houthis.

The Houthis have carried out attacks against the Saudi-backed government in Yemen and repeatedly launched strikes towards Saudi territory. The attacks have raised concerns over potential disruption to oil flows from Saudi Arabia, the world’s largest energy exporter.

The wider regional conflict began after US and Israeli strikes on Iran on February 28 and has since created uncertainty across global energy markets.

Preliminary ship-tracking data from Kpler showed that crude oil flows through the Strait of Hormuz reached 33.7 million barrels during the week beginning September 20. The figure was broadly in line with the previous week’s level.

The Strait of Hormuz remains one of the world’s most important energy routes. Before the outbreak of the Iran war, roughly one-fifth of global oil supplies passed through the waterway, making any prolonged disruption there a major concern for consuming nations and energy markets.

Meanwhile, US President Donald Trump made clear during discussions with Chinese President Xi Jinping that Washington would not accept Chinese assistance to Iran, according to US Ambassador to China David Perdue.

Developments in US-China trade relations could also influence energy markets. Any agreement that reduces trade tensions between the two countries could support global economic activity and, in turn, increase demand for oil and other forms of energy.

Russia-Ukraine Conflict Adds Another Supply Factor

Developments surrounding the Russia-Ukraine war also remained relevant to oil markets.

Ukrainian President Volodymyr Zelenskiy said the United States had proposed that the United Arab Emirates host a trilateral meeting involving Ukraine and Russia as part of efforts to end the conflict, which has continued for four and a half years.

Russian President Vladimir Putin said proposals for a settlement remained under consideration but that Moscow would need to determine whether any agreement served its interests, Russian news agencies reported.

Separately, a drone attack damaged the Novoshakhtinsk oil refinery in Russia, temporarily forcing the facility to halt operations, according to Rostov region Governor Yuri Slyusar.

The attack came after heavy drone strikes on Russian refineries and discussions at the United Nations in New York concerning a possible energy-related ceasefire between Kyiv and Moscow.

A settlement of the Russia-Ukraine conflict could potentially enable Russia to increase its energy exports. Russia, which is part of the OPEC+ alliance, was the world’s third-largest crude oil producer in 2025, behind the United States and Saudi Arabia, according to US energy data.

For global oil markets, the combination of diplomatic efforts involving Iran, security concerns surrounding Saudi Arabia and developments in the Russia-Ukraine conflict is creating competing signals. Hopes for reduced tensions can push prices lower by easing supply fears, while attacks on energy infrastructure and major shipping routes can have the opposite effect.

Traders are therefore closely monitoring negotiations between Washington and Tehran, developments around the Strait of Hormuz and security conditions in major oil-producing countries. Any concrete progress towards a ceasefire or reopening of the strategic waterway could further influence crude prices, while renewed attacks or restrictions on energy exports could add pressure to global supplies.