Oil falls 7% amid signals of a resumption of US-Iran dialogue

Sharp price drop on the eve of the elections

World oil prices plunged by roughly seven percent on Monday, a day before the US midterm elections. According to AFP, Brent fell 7.1% to $105.33 per barrel, while WTI dropped 6.8% to $97.08. The trigger was signals of a resumption of dialogue between Tehran and Washington, which raised hopes for an end to the war in the Middle East.

Diplomatic signals and analysts' caution

On Monday, Iran said there was an 'intense' exchange of signals with Washington and offered to reopen the Strait of Hormuz under strict conditions — amid efforts to prevent the conflict from returning. Earlier, Axios reported that US Vice President JD Vance sent a letter to the head of Iran's national security council, Mohsen Rezaei, about possible new talks; AFP notes this is the highest-level step by Donald Trump's administration in recent months. Arne Lohmann Rasmussen, chief analyst at Global Risk Management, however, suggested that Trump's signals may be tactical ahead of the elections: attacks on shipping in the Strait of Hormuz continue, and his company maintains a forecast of higher energy prices over the long term.

Markets and the elections

Shares of energy companies fell, while many other sectors benefited from cheaper fuel. The main US indices closed higher: the Dow up 1.0% at 52,306.43, the S&P 500 up 0.6% at 7,626.07, and the Nasdaq up 0.7% at 25,618.34. Traders were also watching the elections themselves: Democrats hope to gain at least partial control of Congress, which for the first time in two years would create political constraints for Trump. AFP describes the possible loss of full Republican dominance as the president moving into an unfamiliar 'lame duck' stage — against the backdrop of high inflation, a stalling war with Iran, and hostile Democratic investigations in Washington.

Technology backdrop

Technology stocks on Wall Street recovered moderately after Friday's selloff, which was driven by weak earnings from US giants and deepening doubts about the investment boom around artificial intelligence. Market attention is focused on reports from Apple (reporting after the close of trading on Monday; its shares were down 1% by midday), Advanced Micro Devices and Palantir. Doubts about the profitability of AI companies have not disappeared: shares of Japanese chipmaker Kioxia collapsed by almost 16% after a cautious forecast below expectations — they have lost about 70% from their June record, although they are still up more than 200% since the start of the year. Bitcoin and other cryptocurrencies stabilized after Friday's slump, triggered by the largest hack in the sector's history — the theft of more than $6 billion from the Binance exchange.