Crude Oil Price Forecast: Could US-Iran Diplomacy End the WTI (USOIL) Rally and Push Prices Below $100?

(MENAFN- MENAFNEditorial) 

Written by: Rania Gule, Senior Market Analyst at XS– MENA

The crude oil market is entering a highly sensitive phase, as the balance between geopolitical risks and the prospects of a breakthrough in the US-Iran crisis returns to the forefront o’ investors’ attention.
Meanwhile, West Texas Intermediate (WTI) crude is struggling to hold on to its recent gains following a powerful rally that pushed prices to a five-month high above $104 per barrel. At the same time, recent diplomatic developments have reshaped the crude oil price outlook, with fears of renewed US military operations against Iran beginning to ease. This shift has quickly affected market sentiment, triggering renewed selling pressure.
In my view, the current pullback should not be dismissed as merely a temporary correction. However, insufficient signs still confirm that the broader bullish trend has ended. The market remains caught between two opposing scenarios: the first involves a gradual unwinding of the geopolitical risk premium as negotiations progress, while the second points to continued threats to energy supplies and transportation routes across the Gulf region.
Recent US statements are particularly important in understanding current market movements. US Secretary of State Marco Rubio said President Donald Trump favors a diplomatic solution with Tehran, emphasizing that Washington has not decided to resume military strikes. These messages have eased fears of imminent escalation, especially after markets began pricing in the possibility of renewed military confrontation and the additional disruptions it could cause to global oil flows.
On the other hand, Iranian statements suggest negotiations are continuing through Qatari mediation, with proposals reportedly including reopening the Strait of Hormuz and resuming maritime traffic. I believe these developments are directly pressuring oil prices downward. Markets do not necessarily wait for a final agreement before unwinding the risk premium. Even credible signs that tensions may be contained can be enough to reduce investors’ exposure to potential supply shortage scenarios.
However, it is important to distinguish between a decline in political risks and an actual reduction in supply-related risks, as the two are not necessarily the same. The Strait of Hormuz remains one of the most strategically important corridors for global energy trade. Any prolonged disruption to tanker traffic, or higher shipping and insurance costs, could keep physical oil prices elevated even as futures contracts decline.
Furthermore, continued threats against vessels and energy infrastructure mean that restoring confidence in maritime transportation may take longer than financial markets need to price in diplomatic headlines. Therefore, I do not believe that talks between Washington and Tehran alone are sufficient to justify expectations of a sustained decline in crude oil prices, unless those negotiations translate into concrete arrangements that guarantee maritime security and stabilize oil export flows.
And OPEC+ production policy remains another crucial factor in determining the mar’et’s next direction. The all’ance’s seven leading producers decided to keep their production targets unchanged for December, reflecting their desire to avoid increasing supply while disruptions to global oil flows remain unresolved.
This decision means the market will not receive additional supply from production quota adjustments next month. As a result, it could limit downward pressure on oil prices if logistical bottlenecks and regional tensions persist.
Nevertheless, the impact of this decision will depend on actual production levels and member countries' ability to restore exports, rather than simply on the announced production quotas. The a’liance’s upcoming meeting on November 29 will also be an important milestone in assessing 2027 production plans, especially as uncertainty over the conflict grows and questions remain about whether Gulf oil supplies can return to normal levels.
More broadly, I believe the oil market faces a more complicated equation than a simple supply-and-demand comparison. The geopolitical risk premium and the actual cost of transporting oil barrels have become increasingly influential in determining prices.
Even if diplomatic efforts succeed, shipping and insurance costs may not quickly return to previous levels. Meanwhile, restoring production and exports requires sustained stability, not a temporary easing of political rhetoric.
Conversely, persistently high oil prices could weigh on global demand, increase transportation and production costs, and intensify inflationary pressures. This could prompt central banks to adopt more cautious monetary policies.
Consequently, any further rise in crude oil prices may face demand-side resistance, particularly if higher energy costs begin to affect global economic activity and consumer spending. Trading on Monday, November 2, clearly highlighted this sensitivity. WTI crude oil came under selling pressure as Qatari-Iranian negotiations continued and immediate fears of military escalation diminished. Meanwhile, Brent crude futures also fell by more than 3% at times during the session.
What stands out, however, is that these losses followed a strong rally throughout October. This increases the likelihood that at least part of the current decline reflects profit-taking and a reassessment of the geopolitical risk premium, rather than a complete shift in the underlying fundamentals governing the energy market.
From a fundamental perspective, I believe the most important factor over the coming days will be whether diplomatic efforts can move beyond positive statements and deliver tangible results. If Qatari mediation brings Washington and Tehran closer to an agreement, and clear signs emerge that maritime traffic through the Strait of Hormuz is returning to normal, crude oil prices are likely to face further downward pressure. This could gradually reduce the risk premium that has supported prices in recent weeks.
However, if negotiations stall or military threats return to the forefront, bullish momentum could recover rapidly, given how sensitive markets remain to news about the security of oil facilities and export routes. This means oil prices may continue to react more sharply to geopolitical headlines than to some traditional economic data releases during the current phase.
Looking ahead, I believe the most likely near-term scenario is continued volatility with a corrective bias, provided that the prospects of a diplomatic settlement remain alive and no signs of renewed military escalation emerge.
Nevertheless, WTI crude oil trading near the $100 level suggests the market still carries a substantial geopolitical risk premium. Investors are not yet fully convinced the supply crisis is over. On the other hand, any agreement that guarantees maritime security and restores oil exports to normal levels could open the door to a deeper correction, especially if it coincides with improving global supply expectations for the coming year.
In my assessment, investors should not focus exclusively on political statements. Instead, they should monitor three key indicators: progress in US-Iran negotiations, Security developments in the Strait of Hormuz, and OPEC+ adherence to its current production policy.
Together, these factors will determine whether the current pullback marks the beginning of a broader bearish reversal or merely a temporary pause within a bullish trend whose underlying drivers remain intact.
The OPEC+ meeting at the end of November could also provide clearer signals on producers’ strategy for the coming year, particularly if Gulf oil supplies returning to the market begin to influence estimates of the global supply-demand balance.
Ultimately, I believe the crude oil price outlook remains shaped by a clear conflict between diplomatic optimism and the risks of supply disruptions. A move below $100 per barrel for WTI crude oil could mark an important turning point in how investors assess the market's next phase. However, it would not, on its own, be enough to declare the end of the broader bullish trend.
A sustained correction would require tangible diplomatic progress and an actual improvement in shipping activity and oil supplies. Meanwhile, a breakdown in negotiations could rapidly reprice geopolitical risk and push prices higher.
For this reason, I maintain a cautious near-term outlook on crude oil, while leaving open the possibility of a strong return of bullish volatility. Geopolitics has not lost its influence. Instead, it has become the most sensitive driver of expectations across the global energy market.
As a result, the next major move in WTI crude oil and USOIL will likely depend less on conventional market fundamentals alone and more on whether diplomatic efforts can deliver lasting stability across the Gulf region.

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