Oil Gets Smoked as Iran Diplomacy Hopes Slash War Premium

Crude oil got hammered Monday as traders bet on diplomacy. Brent crude fell by $8.66 to close at $104.77, a 7.63% drop, while WTI slid by $7.66 to $96.46, down 7.36%. The risk premium that had been baked into barrels came out fast once Washington and Tehran started talking.

President Trump said Iran wants a deal. Iranian President Pezeshkian signaled he'd pursue a solution through dialogue, and Foreign Minister Araghchi said an agreement is possible if the U.S. shows good faith. Talks between Iran and Qatar have run three days, with a draft reportedly on the table.

Plenty of caveats remain. Iran's proposal is conditional and the U.S. hasn't accepted it, according to investingLive. Supreme Leader Mojtaba Khamenei told the military on the 1st to respond to threats immediately and without geographic limits, Hormuz transit isn't back to normal, and tanker attacks have been reported. Raymond James analysts urge caution, citing past false dawns, and CNBC noted prior rallies that reversed when fighting resumed. Oil still jumped over 10% in October, and WTI remains up 67.99% year to date.

Europe's equity market took the win. The Stoxx 600 added 0.42% to a two-month high, led by travel and leisure stocks up about 3% — their best day since June — on cheaper fuel hopes for airlines. Energy was the worst sector, down 2.3%, with BP off 4.6%, Shell 3% and TotalEnergies about 2.5%. LSEG data shows European energy profits grew 139% in the July-September quarter, making the sector twitchy about any reversal.

Wall Street split. The Dow gained 0.41% while the S&P 500 dropped 0.51% and the Nasdaq Composite fell 1.07% as the semiconductor sell-off rolled on. Bitcoin sat at $76,712, down 1.95%, and Ethereum traded at $2,249.45, off 1.03%. Gold rebounded 1.75% and silver 3.54%, though both are still down 4.74% and 17.07% over the past month.

In Asia, China's Shanghai Composite rose 1.08% and India's SENSEX climbed 1.66%, helped by lower oil for importers. South Korea's KOSPI jumped 2.2%. Fitch kept France's A+ rating after the October 30 close but cut the outlook to negative, pointing to slowing growth, rising borrowing costs, a wider deficit and parliamentary gridlock. Next up: Australia's policy decision today and U.S. midterm voting tonight.