Oil prices settled almost $2 lower on Tuesday as renewed diplomatic activity in the Middle East reduced some of the immediate supply concerns supporting crude markets. However, Brent remained near a six-month high, reflecting continued uncertainty around commercial shipping and the absence of a broader agreement to end the conflict involving the United States, Israel and Iran.

Diplomatic Talks Weigh on Oil Prices

Brent crude futures settled down $1.93, or 1.67%, at $113.88 a barrel, while U.S. West Texas Intermediate crude fell $1.86, or 1.83%, to $99.90. The decline followed recent gains that had pushed crude prices toward their highest levels in roughly six months.

Market sentiment improved after Saudi Arabia, Turkey, Pakistan and Iran agreed to continue discussions aimed at reducing tensions. Iranian Security Council chief Mohsen Rezaei met Supreme Leader Ayatollah Mojtaba Khamenei on Tuesday, following talks with representatives from the three regional countries a day earlier.

Shipping Disruptions Keep Supply Risks Elevated

Despite the diplomatic developments, the physical oil market remains exposed to significant geopolitical risks. Reuters reported that attacks on commercial shipping near the Strait of Hormuz in October reached their highest level since 2017, highlighting the continued vulnerability of one of the world’s most important energy transportation routes.

Disruption to shipping can affect crude markets even when oil production remains intact. Higher freight costs, insurance premiums and delays can tighten effective supply and increase the risk premium embedded in benchmark prices. That helps explain why Brent remains above $110 despite the latest decline.

Peace Prospects Remain Uncertain

The market is also waiting for evidence that diplomatic efforts can translate into a sustained reduction in hostilities. While the agreement among Saudi Arabia, Turkey, Pakistan and Iran to continue talks represents a potential channel for de-escalation, a broader agreement to end the U.S.-Israeli war with Iran remains elusive, according to the Reuters report.

For energy markets, the distinction is important. Temporary diplomatic contacts may reduce expectations of an immediate escalation, but traders are likely to remain cautious until there is greater clarity over the security of regional infrastructure and shipping routes. Continued uncertainty can keep a geopolitical premium embedded in crude prices.

Oil Outlook Hinges on Diplomacy and Shipping

The next phase of negotiations will be closely watched alongside developments around the Strait of Hormuz and attacks on commercial vessels. A sustained diplomatic breakthrough could reduce the supply-risk premium and place additional downward pressure on Brent and WTI, while renewed attacks or a deterioration in negotiations could quickly reverse the latest decline.

For global markets, the oil outlook remains closely linked to the balance between de-escalation efforts and physical supply disruption. Until that balance becomes clearer, crude prices are likely to remain sensitive to geopolitical headlines, with Brent’s position near six-month highs underscoring the market’s continued caution.