Oil drops as Iran war diplomacy to pick up after supply snarls

Kanoko Matsuyama, Bloomberg News on Sep 18, 2026

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Oil dropped for a third day, with traders looking to the next round of diplomacy that’ll shape the U.S.-Iran war as supply concerns eased.

Brent fell below $103 a barrel after losing more than 3% over the two previous sessions, while West Texas Intermediate traded near $101. Saudi Arabia has moved to restore the damaged East-West pipeline to its Red Sea coast, aiming to return about half its capacity within days. Oil continues to traverse the contested Strait of Hormuz, plugging some of the shortfall, but flows remain below pre-war levels.

President Donald Trump told Axios he was approaching a “big decision” on whether to re-escalate attacks on Tehran. A meeting with Persian Gulf nations is planned for next week on the sidelines of the United Nations General Assembly in New York, while the U.S. leader is due to hold a summit with Chinese counterpart Xi Jinping that may touch upon the war.

Ahead of that, Beijing privately asked Iran to help rein in Houthi militants in Yemen after an appeal to China by Riyadh, Reuters reported. The Tehran-backed Houthis have attacked facilities in Saudi Arabia and advanced toward the Bab el-Mandeb, the chokepoint at the southern end of the Red Sea.

Crude is finishing up a volatile week with supply concerns to the fore — initially gaining ground on the Saudi pipeline disruption before retreating. Global benchmark Brent has gained about 70% this year as the conflicts in the Middle East and between Russia and Ukraine drag on. That’s fanning inflationary concerns, with Goldman Sachs Group Inc. predicting more gains for gasoline.

Oil’s recent drop appears to be a cooling of the geopolitical risk premium rather than a fundamental reversal, said Priyanka Sachdeva, head of market insights at Phillip Nova Pte Ltd. in Singapore. Sentiment is still far from bearish, with traders awaiting evidence of restored supply, she said.

JPMorgan Chase & Co. analysts including Natasha Kaneva said the length of the Iran war and impact on flows was now increasingly hard to predict. “For the first time since the start of the Iran conflict, we don’t have a baseline view,” they said. “We simply don’t know how to model the endgame.”

Risks to shipping passing through Hormuz persist amid Iranian threats to vessels using routes it regards as unapproved. U.K. Maritime Trade Operations said it received a report of a tanker being struck by an unknown projectile while transiting outbound of the strait on Wednesday.

—With assistance from Charles Gorrivan.