WHAT YOU NEED TO KNOW

  • Brent crude climbed more than 4% above $108 before retreating to around $105, while WTI rose near $97 and later fell below $95.
  • Houthi militants claimed strikes against Saudi military targets as the conflict continued disrupting Saudi oil exports through the Red Sea.
  • US and Iranian negotiators reportedly pursued a phased agreement involving Hormuz shipping access and relief from the US naval blockade.
  • A reported diesel export ban lasting 90 days raised concerns about refinery production, gasoline supplies and global fuel prices.

Oil prices swung sharply on Thursday as reported attacks inside Saudi Arabia and forceful statements from US and Iranian leaders collided with indications that Washington and Tehran were pursuing a negotiated agreement.

Brent crude futures rose more than 4% and climbed above $108 per barrel, recovering losses that had pushed the international benchmark below $100 over the previous few days. The contract later retreated to around $105.

US WTI crude futures advanced by roughly the same margin and traded near $97 before falling back below $95. The reversals reflected rapidly shifting developments involving Saudi oil exports, the Strait of Hormuz and negotiations between the United States and Iran.

Prices initially surged after Yemen's Houthi militant group claimed it had completed a major round of strikes against Saudi military targets. The group has been involved in a widening conflict with Saudi Arabia.

MORE NEWS: Oil Prices Slide as Iran Revives Failed June Peace Memorandum

That conflict has severely limited the kingdom's capacity to export oil, threatening to further reduce volumes flowing from the Persian Gulf. Houthi attacks have also continued to disrupt Saudi Arabia's ability to move oil through the Red Sea.

The latest rally had already gained momentum after remarks at the UN General Assembly summit in New York on Wednesday. Iranian President Masoud Pezeshkian said Tehran would continue refusing to yield to US pressure and reaffirmed its commitment to maintaining its nuclear program.

Iranian leaders have long maintained that the country's nuclear program is used only to produce civilian energy. President Trump and other senior White House leaders, however, have identified Iran's nuclear capabilities as a crucial red line in the war between the countries.

Trump has repeatedly said that Iran “must not have a nuclear weapon.” In his own UN remarks, Trump said that while he was considering whether to “annihilate” Iran, he expected Washington and Tehran to reach an agreement after the US midterm elections.

“I believe we'll make a deal right after the election because it doesn't make sense for them not to,” Trump said. “They're waiting to see how I do in the midterm election.”

Reports on Thursday indicated that US and Iranian negotiators were working toward a phased agreement, first reported by Reuters. Under the reported arrangement, Iran would reopen the Strait of Hormuz to shipping traffic in exchange for relief from the US naval blockade of the country.

News of those negotiations drove oil prices lower and erased part of the gains recorded earlier in the session. Even with diplomatic efforts potentially returning to the agenda, the global oil market continued to face several sources of pressure.

The Strait of Hormuz remained largely closed to consistent traffic, while continuing Houthi attacks impaired Saudi export operations through the Red Sea. Ukrainian military attacks had also inflicted further damage on Russia's refining sector.

MORE NEWS: Iran Floats Seven Day Hormuz Reopening as Nuclear Talks Hang in Balance

Pressure was also building in the United States, where the White House was reportedly preparing a diesel export ban lasting 90 days. Gasoline prices averaged $4.85 on Thursday, up 53% from a year earlier, while diesel prices reached $6.51 after climbing 76%.

A diesel export ban could offer relief in the near term for US consumers, particularly in the Gulf Coast region, where most American refining capacity is located. Market analysts and industry participants warned, however, that the policy could produce unintended consequences.

If refiners were unable to export diesel, they could reduce production, which would also cut gasoline supplies and potentially intensify price pressures for Americans. The United States has become an important global diesel supplier since the outbreak of the Iran war.

Removing US diesel supplies would likely drive prices substantially higher in allied countries including the UK, France and Germany. According to the source, those countries have experienced more severe cost pressures than the United States, adding to concerns about the wider effects of any export restriction.