Oil prices fall as peace hopes offset fears of growing Middle East conflict

Oil prices experienced a drop on Thursday, reversing the gains noted the previous day, as peace talks in the Middle East prompted a reduction in concerns over potential supply disruptions. Brent crude futures experienced a decline of 82 cents, or 0.7%, to $114.50 per barrel, while US West Texas Intermediate (WTI) crude futures decreased by $1.04, or 1.0%, to $101.74.

Earlier in the week, Brent had risen by 1.3%, and WTI had gained 3%. According to Yuki Takashima, an economist at Nomura Securities, the decline was attributed to expectations that peace negotiations may resume. However, the drop remained contained as worries persisted about intensified attacks by the Houthis and fears of a potential US attack on Iran following its mid-term elections scheduled for November 3.

The Saudi-led coalition reported destroying a ballistic missile launched by the Houthis towards the kingdom's eastern region on Thursday, as ongoing hostilities between the two sides continued unabated. Additionally, the Houthis attacked Aden airport on Wednesday, following an incident the previous day where they allegedly targeted Saudi Arabia's largest oil refinery with a missile.

Despite these developments, Saudi authorities have not yet confirmed the strike on the 550,000-barrel-per-day facility. Iran has stated it will respond to the US response on the Hormuz proposal following a review of Qatari mediators' presented a new draft deal aimed at ending the war with the US and Israel. However, a senior Iranian official dismissed the proposal as unacceptable and deemed it far from a genuine offer.

Iran's foreign minister maintained that diplomacy still holds the potential for success and suggested that Tehran might complete its seven-day plan in less than a week if adopted. Meanwhile, the US Energy Information Administration reported that energy firms had withdrawn 1.9 million barrels of crude from storage during the week ending October 23, surpassing analysts' expectations of a 15,000-barrel build in a Reuters poll.