Oil heads higher as US-Iran peace talks in stalemate

Oil prices experienced a significant rebound of more than 1% on Monday, following US President Donald Trump's rejection of Iran's peace deal aimed at resolving their conflict and reopening the Strait of Hormuz. Brent crude futures increased by $1.32, or 1.27%, to $105.64 a barrel, while US West Texas Intermediate crude rose by 70 cents, or 0.76%, to $93.11 a barrel.

Iran had proposed peace last week at the UN General Assembly in New York, transmitting the plan to the Americans via Qatari mediators. However, Trump announced on Saturday that he rejected the plan, indicating that US negotiators would engage in further talks this week. Geopolitical risks remain elevated due to continued attacks by Iran and the Houthis on Saudi Arabia, which puts regional supply flows at risk.

In the previous week, Brent crude edged up by 0.4%, while WTI dropped by 7.9% due to concerns about potential US diesel export restrictions to combat record prices, which could hinder US refining output. Refined oil products are a significant concern, as record US diesel prices heighten inflation risks and spark debates on possible export curbs.

Any restrictions on US diesel exports would tighten supply outside the US, affecting European prices due to reduced American supply. In September, crude oil exports from key Middle East producers surged to 12.8 million barrels per day, the highest level since the war began in February, as Saudi Arabia and the United Arab Emirates boosted exports.

This increase occurred following a recovery in shipments through the Strait of Hormuz, which was expected to reach around 7.4 million bpd in the current month, as Saudi Arabia redirected exports from the Red Sea port of Yanbu to its eastern Ras Tanura port following attacks that damaged its East-West pipeline.