Oil falls on Iran talk hopes and lifts US stocks, though analysts see a risk premium left

Oil prices fell sharply on Monday on hopes of talks to end the war between the US and Iran, and US stocks opened higher. Brent crude futures fell 7.7% to $104.66 a barrel as of 12:11 p.m. ET, CNBC reported.

Oil slid to a two-week low before Wall Street opened

Brent had fallen below $106 a barrel at 8:57 a.m. ET, the first time since October 20 and about 9% below its close on Friday, the Guardian reported. US West Texas Intermediate declined 7.3% to $96.50 a barrel at the same time as CNBC's Brent reading, CNBC said.

The Guardian, citing Bloomberg, said oil began falling after Iran's supreme leader gave the government approval to pursue talks that could resolve the conflict. On Sunday, President Donald Trump told a radio network that the war would end either with a deal or by force, the Guardian reported.

What officials said

Secretary of State Marco Rubio said the president "hasn't made a decision" on Iran, CNBC reported. Iran's foreign minister, Abbas Araghchi, said an agreement is possible if Washington "demonstrates goodwill," according to CNBC.

The Guardian quoted Trade Nation analyst David Morrison as saying concerns remain that the conflict could flare up again after the US midterm elections on Tuesday, because mediators from Qatar are still talking to Iranian officials but President Trump has threatened to reengage militarily.

Stocks opened higher after a rout in AI shares

The S&P 500 opened up 0.45% and the Nasdaq up 0.63%, the Guardian reported at 9:37 a.m. ET. It described the session as coming after last week's rout in AI stocks, which FinanceInTime covered in its report on the Nasdaq's October loss.

Analysts are not treating the risk as removed

Ryan McKay of TD Securities said, as quoted by CNBC, that "we do not anticipate a complete erosion of the risk premium via diplomacy headlines alone." The figures above are intraday readings at the times given, not closing levels, and prices can change.

A day of oil headlines is thin evidence for stocks

We read this as a move in expectations rather than a change in facts. Oil fell because talks looked possible, and stocks rose because lower oil eases the inflation worry that has weighed on rate expectations. Nothing in the reports above shows a signed agreement, and the threat of renewed strikes after the midterm elections remains, so the gain rests on a hope. We would weigh how long Brent holds below $106 and whether shipping through the region normalizes more than the size of one session's move. We expect the sensitivity of stocks to oil headlines to stay high if talks stall, and to fade if a deal is confirmed; a renewed strike would reverse the pattern. Lower energy prices are also an opportunity for companies and households that have paid more for fuel, while a quick reversal is the threat.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.