Oil prices rose by more than 1% in Monday’s trading session. The main driver was US President Donald Trump’s rejection of Iran’s peace proposal, which temporarily dashed hopes of reopening the Strait of Hormuz and further heightened tensions in the Middle East.

Market Highlights

Markets opened the week in positive territory, with the following price movements:

• Brent crude: Rose $1.32, or 1.27%, to $105.64 per barrel.

• US WTI crude: Rose 70 cents, or 0.76%, to $93.11 per barrel.

What Is Driving Oil Prices?

Geopolitical Stalemate in the Middle East

Last week, at the United Nations General Assembly in New York, Iran used Qatari intermediaries to deliver a peace proposal to the United States. However, President Trump rejected the plan on Saturday. Although he told Axios that he expected further negotiations to take place this week, geopolitical risks continue to weigh heavily on the market.

Meanwhile, attacks targeting Saudi Arabia have continued. The Saudi-led coalition in Yemen said it had successfully intercepted two ballistic missiles and two drones launched by the Iran-backed Houthi forces. According to analysts at ANZ, the ongoing attacks continue to pose a threat to oil supply flows across the region.

Inflation Concerns and the Risk of a US Diesel Export Ban

While Brent crude edged up 0.4% last week, WTI plunged 7.9%. The decline was driven by concerns that the United States could impose a ban on diesel exports in an effort to bring record-high domestic prices under control.

Such a move could reduce US refinery output and immediately tighten fuel supplies outside the United States. Analysts warn that European markets could react sharply if US exports decline significantly.

Supply Bright Spot in September

Despite the heightened tensions, the overall export outlook is not entirely bleak. Preliminary data from Kpler showed that crude oil exports from major Middle Eastern producers have recovered:

• Reaching 12.8 million barrels per day in September — the highest level since the war began in February.

• Shipments through the Strait of Hormuz are expected to reach 7.4 million barrels per day this month.

• Key driver: Saudi Arabia and the UAE have increased exports. In particular, Saudi Arabia has flexibly redirected oil flows from the Red Sea port of Yanbu to the eastern port of Ras Tanura after its East-West oil pipeline was damaged in an attack.

Refined product supply constraints and the next diplomatic moves by the United States will likely remain key factors shaping the energy market in the days ahead.

Source: Reuters