Oil prices fell five times in a row and hit a new low for two weeks: Iran is rumored to be proposing to reopen Hormuz, and Saudi Arabia's key pipeline is restarting

The Zhitong Finance App learned that on Tuesday, international oil prices fell sharply for the fifth consecutive trading day, hitting a two-week low. The market is digesting diplomatic rumors that Iran may re-open the Strait of Hormuz, as well as news that Saudi Arabia's key east-west oil pipeline has been restarted.

According to the data, Brent crude oil futures once fell below 98 US dollars/barrel during the intraday period, and US WTI crude oil once fell below 90 US dollars/barrel. As of press release, Brent's November contract was $98.80 per barrel; WTI's October contract was $90.68 per barrel.

According to reports, Iran proposed that if the US takes initial measures to ease military pressure, it will reopen the Strait of Hormuz within 7 days. However, Iran's semi-official Farsi News Agency later pointed out that “Iranian sources say these reports are unreliable and untrue.” The report said that the Iranian delegation attending the United Nations General Assembly has been fully authorized to seek the resumption of diplomacy with the United States. This is seen as the latest sign that Washington and Tehran may re-engage over the Strait of Hormuz standoff.

US President Trump held a series of meetings with leaders of many countries during the UN General Assembly in New York on Tuesday and hinted that he would like to meet with Iranian President Masood Pezzahizyan. This has allayed market concerns to a certain extent. When asked about a possible meeting between the two leaders, US Secretary of State Marco Rubio said, “I don't think there are any current arrangements.” But he added that the US “is open to similar meetings.”

However, the two governments threatened each other over the weekend. At the same time, the US side continues to exert pressure. Treasury Secretary Scott Bessent said on Monday that Washington is “putting pressure on Iran in an unprecedented way,” and mentioned that the new sanctions cover aviation, shipping activities, cryptocurrencies, and gold. Bessent also directly linked the Iran conflict to financial markets, saying that long-term US Treasury yields showed an unusually high correlation with crude oil and refining price spreads; he expects oil supply to increase and interest rates to fall once the conflict is over.

Another factor driving down oil prices is Saudi Arabia's east-west oil pipeline. The pipeline actually acts as a detour route through the Strait of Hormuz. Since oil flows in the Strait of Hormuz were interrupted due to the war between the US and Israel against Iran, Saudi Arabia, the main OPEC exporter, has been using this pipeline to divert about 4 million barrels/day of crude oil, which accounts for about 4% of global supply, to the Red Sea port of Yanbu.

According to information, the previous drone attack forced Saudi Arabia to close the East-West Pipeline and stop loading crude oil at Yanbu Port on September 13. Speaking about oil prices, Rubio said, “If you look at the increase over the past two weeks, the vast majority of this was because the Houthis attacked the Saudi pipeline, and Saudi Arabia had to shut down the pipeline.” He added: “There is still oil in the system, but the market is reflecting expectations that Saudi oil will decrease in the future. This is an issue we are dealing with.”

Meanwhile, according to three sources familiar with the matter, Saudi Arabia has restarted the pipeline and may resume exports from Yanbu later on Tuesday.

Two sources said the pipeline was pumped at a low rate after being restarted. A source said Saudi Aramco is seeking to restore the pumping rate to 4 million b/d, while a security source said full recovery could take weeks.

A source also pointed out that the pipeline will resume supplying crude oil to Aramco refineries along the Red Sea, and plans to load a cargo in Yanbu and ship it to China on Tuesday. Two other trade sources said that traders are preparing for Saudi oil loading by transferring oil tankers to the Egyptian Mediterranean port of Said for ship-to-ship transfers and transfers to Sidi Kerir.

Saudi Aramco did not immediately respond to a request for comment.

Macro and market reactions

Since the US and Israel went to war against Iran on February 28, ship traffic in the Strait of Hormuz has almost come to a standstill. According to MarineTraffic data, the daily traffic volume last week was less than 20 ships. Before the war, the strait handled about 125 large merchant ships every day, carrying about one-fifth of the world's oil and LNG supplies. According to Kpler data, 17 commercial ships passed through the strait last weekend, compared to 37 the previous week.

Since the beginning of this year, both crude oil benchmarks have risen by more than 60%. Retail gasoline prices in the US once reached $4.47 per gallon on Tuesday, up 50% since the start of the war in Iran. Diesel prices also soared sharply. The US national average price hit a record high of 6.52 US dollars/gallon on Tuesday, rising 82% since the beginning of the year. This was partly driven by the intensification of air strikes between Russia and Ukraine. As a result, Trump is also planning to hold talks with Ukrainian President Zelensky on Tuesday to push for an energy truce.

As oil prices fell, US bond yields declined. The 10-year US Treasury yield once fell to 4.92%, and reached 5.04% a week ago, the highest since 2007. The yield on 30-year treasury bonds fell to 5.25% on Tuesday and rose to 5.4% last week, also the highest since 2007. Global stock markets rose, the European Stoxx 600 index rose more than 0.5%, and Germany's DAX and France's CAC 40 index also rose. US stock index futures rose slightly, S&P 500 futures rose 0.13%, and Nasdaq 100 futures fell slightly by 0.03%. Earlier on Monday, the two major indices recorded their best single-day performance since August.

Chicago Federal Reserve Chairman Austin Goulsby emphasized on Monday that oil is part of the inflation problem. He believes that if supply shocks continue to push inflation above the Federal Reserve's 2% target, we cannot “turn a blind eye” to it indefinitely, although the policy response may not be as aggressive as when demand-driven overheating.