Brent crude oil prices weakened during Asian trading hours on Monday (November 9), hovering around US$97.31 per barrel. This decline extends the downward pressure seen throughout the previous week, when oil prices underwent a sharp correction amid growing hopes for a resolution to the conflict between the United States and Iran. Optimism surrounding diplomatic efforts has prompted market participants to reduce the geopolitical risk premium that had previously bolstered global oil prices.
The bearish sentiment intensified after US President Donald Trump signaled that further military action against Iran has become less likely, provided that negotiations continue to show progress. This statement has fueled expectations that tensions in the Middle East could ease, potentially allowing oil distribution from the region to gradually return to normal. While security risks around the Strait of Hormuz remain a concern for investors, the perceived threat of global supply disruptions has diminished.
Meanwhile, the market is also weighing the outlook for global energy demand against the potential for increased oil supply. The reduction in the war-risk premium leaves room for further adjustments in Brent prices, particularly if diplomatic progress between the US and Iran persists. Nevertheless, reports of attacks on oil tankers and ongoing uncertainty regarding the security of energy trade routes could limit further price declines. Investors are also closely monitoring economic developments in the United States and China—the world’s two largest energy consumers.
In relation to the US dollar, lower oil prices could help alleviate energy-driven inflationary pressure in the United States, potentially reducing the need for the Federal Reserve to maintain an overly restrictive monetary policy over the long term. Such a scenario could temper the dollar’s strength, especially if expectations for interest rate cuts begin to rise again. However, the resilience of the US labor market and the prospect of interest rates remaining elevated continue to provide support for the currency. Consequently, the US dollar is expected to remain stable or show only modest gains, as the market awaits further developments in Middle Eastern diplomacy and signals regarding the Federal Reserve’s monetary policy. (CP)