Brent dips 1.7% to $113.88 but stays near six-month highs as talks and attacks collide
Oil stays close to six-month highs because traders are still paying for the risk of a wider war, and the next big move depends on whether Trump picks a deal with Iran or more strikes.
The short version
Written with AI, checked by an editor- Brent fell 1.7% to $113.88 a barrel by late morning in New York on October 27, a modest dip that leaves it near six-month highs.
- Talks in Tehran eased fears of escalation, while Houthi missiles fired at Saudi Arabia and a possible US strike on Iran kept a war-risk premium in prices.
- Watch whether Saudi Arabia confirms damage at Ras Tanura, and whether Trump chooses a deal or escalation; either could reset prices.
Oil swung between peace talks and missile attacks
Oil prices swung back and forth on Tuesday, October 27, as traders weighed a new round of diplomacy over the war with Iran against fresh missile attacks on Saudi Arabia. Brent crude, the global benchmark, fell 1.7% to $113.88 a barrel by late morning in New York, after trading as high as $116.26 earlier in the day. West Texas Intermediate (WTI), the US benchmark, followed the same path to $100.05, its second straight day of declines.
On the peace side, Saudi Arabia's defence minister met Iranian President Masoud Pezeshkian in Tehran on Monday, with senior military and intelligence officials from Pakistan and Turkey also taking part. Iranian state media said the four countries agreed to keep talking. Supreme Leader Mojtaba Khamenei said the state of "neither war nor peace" had to end, though he also spoke of keeping control over the Strait of Hormuz.
On the war side, air defences destroyed three Houthi ballistic missiles aimed at Saudi Arabia's Eastern Region early Tuesday, and the Saudi-led coalition said two more fired toward Riyadh were intercepted, where an air raid alert briefly sounded. The Houthis claim one missile hit Ras Tanura, the kingdom's biggest refinery; Saudi authorities have not confirmed it. Bloomberg, citing one unnamed source, reported that a fire near the site was quickly contained; the extent of any damage is not known.
Most of this is a continuation, not a fresh shock. The Houthis have stepped up attacks on Saudi energy sites for weeks, including drone strikes that shut the East-West pipeline for two weeks in September. Brent topped $117 last week, its highest since April, and Tuesday's dip leaves it close to that level. What is new is the Tehran meeting and the claim about Ras Tanura.
Why fear, not lost barrels, is setting the price
Oil is expensive mainly because traders are paying for a war that could get worse. When people fear supplies may be cut, they bid up oil for delivery now, adding a risk premium: an extra cost above what today's supply and demand would justify. Bjarne Schieldrop, an analyst at SEB, said prices carry a "significant risk premium" for a possible US or Israeli attack on Iran in the coming weeks. Brent is up almost 90% this year, so a lot of fear is already in the price.
That explains why the diplomacy moved prices only a little. Continued talks lower the odds of escalation, but a CNN report that US forces could strike Iran within 96 hours of an order from President Trump pulled the other way. Trump said on Sunday he was close to choosing between a deal and stepping up military operations. Until he decides, each headline nudges the price without resetting it.
Ras Tanura matters because of how Saudi oil leaves the country. Nearly all Saudi exports pass through two ports, Ras Tanura on the Gulf and Yanbu on the Red Sea, and the Houthis have attacked both before. Ras Tanura alone handles 550,000 barrels a day. Saudi exports have held up through eight months of regional conflict, so a confirmed hit that cut shipments would turn a fear premium into a real loss of supply.
For households, the chain runs from crude to fuel bills and then to interest rates. Costly oil pushes up the price of petrol and heating, and central banks respond when that feeds inflation. Canada's central bank is widely expected to raise its policy rate from 2.25% to 2.50% on Wednesday, its first hike in about three years, with inflation at 3.1% in September.
What this means for oil, fuel and Canadian assets
The clearest effect is choppiness rather than a firm direction. Brent traded between about $114 and $116 as headlines flipped, and nothing in Tehran or Ras Tanura has been settled. A Brent contract for January delivery opened at $110.27, about $4 below today's price, a sign traders expect some of the fear to fade. UBS expects Brent to stay near $110 through year-end, up from its earlier $100 forecast.
Fuel prices are linked too. Gasoline futures generally move with crude, so while WTI stays near $100 a barrel, there is little relief in sight. A diplomatic breakthrough would ease that; a confirmed outage at a Saudi export port would add to it.
Canada sits on both sides. Energy companies are a large part of the S&P/TSX Composite, so high crude supports their profits, and USD/CAD tends to move opposite to oil. High oil is also feeding inflation, which is why the Bank of Canada is expected to raise rates.
Brent swung between roughly $114 and $116 on competing headlines, and with Trump's deal-or-strike choice and Ras Tanura damage unresolved, more such swings are likely (medium confidence).
Wrong ifA clear diplomatic settlement or confirmed escalation that settles the direction and calms intraday swings.
WTI tracks Brent's war-risk premium, which talks could shrink and a US strike or Saudi export outage could enlarge.
Wrong ifA sustained break well away from the $100 area in one direction on confirmed news.
Fuel prices tend to follow crude, so crude held near six-month highs keeps upward pressure on pump prices.
Wrong ifA US-Iran deal that drains the risk premium and pulls crude toward $100 or below for Brent.
USD/CAD tends to move opposite to oil, so if crude stays near six-month highs the pair may face some downward pressure; no move has yet been observed.
Wrong ifOil falls sharply on a diplomatic breakthrough.
The premium could drain fast, or turn into real shortages
The strongest case for lower prices is that a risk premium can vanish as quickly as it builds. If Trump chooses a deal, and Tehran's conditions for talks with Washington, an end to the US blockade and the lifting of oil sanctions, become a basis for negotiation, much of this year's near-90% rise could unwind.
The opposite risk is that the fear is not yet fully priced. October has been the worst month for attacks on shipping in and near Hormuz in records kept since 2017, and if damage at Ras Tanura disrupted exports, prices would be reacting to missing barrels, not just the threat of them.
The decisions that could move oil next
Israel's election results are due late Tuesday or Wednesday, and Commerzbank said the outcome could shape the course of the Iran war. Central banks follow: the Bank of Canada and the Federal Reserve decide on October 28, the ECB on October 29 and the Bank of Japan on October 30, with US midterm elections on November 3.
The signals that matter most are any Saudi statement on Ras Tanura and Trump's choice. A move back above last week's $117 high would suggest escalation is winning; a slide toward $110 would suggest diplomacy is.
- 2026-10-27Israeli general election results: Commerzbank said the outcome could affect the course of the Iran war and so the oil risk premium.
- 2026-10-28Bank of Canada rate decision: An expected hike to 2.50% would show high oil feeding directly into borrowing costs.
- 2026-10-28Federal Reserve FOMC decision: Shows how the US central bank weighs oil-driven inflation.
- Saudi statement on Ras Tanura damage: A confirmed hit that disrupted exports would turn a fear premium into lost supply.
- 2026-11-03US midterm elections: Adds to the political backdrop for Trump's decision on Iran.
Researched and drafted with AI assistance from the sources below, checked against our editorial standards, and reviewed by a named editor. How we use AI → Found an error? Report it.
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