Oil slides as Iran offer and Saudi export resumption ease supply fears

Headlines:

• Fars news denies reports of Iran ready to reopen Strait of Hormuz if the US eases blockade

Markets:

• WTI crude down -3.30% to $89.33
• US10Y yield down 3 bps to 4.93%
• NZD leads, AUD lags on the day
• Gold down -0.57% to $4318
• Bitcoin down -1.18% to $85,951
• European indices higher; S&P 500 futures up 0.06%

The session's key driver was a Kyodo report suggesting Iran had proposed a reopening of the Strait of Hormuz within seven days, contingent on the US ending its blockade of Iranian ports and stopping military operations near the strait. The offer was said to have been passed to Washington via intermediaries as diplomatic efforts ramped up around the UN General Assembly. Reuters later confirmed the report.

That news sent oil prices falling quickly, with markets continuing to price in de-escalation and the resulting relief on supply constraints. Other markets also reacted positively. Equities, digital currencies, gold, and the like rallied on the view that reduced tensions would lower inflation and rate hike expectations, ultimately boosting risk appetite. The US dollar, meanwhile, gave back part of its earlier advance as odds of an October rate hike slipped.

Crude extended its slide after word emerged that Saudi Arabia was poised to resume oil exports from the Red Sea port of Yanbu as soon as Tuesday, per people familiar with the matter. Several Asian refiners were reportedly told by Saudi Aramco that they could soon start lifting crude from Yanbu again.

Late in the session, Fars News, citing Iranian sources, denied that Tehran had offered to reopen the Strait of Hormuz. Following that denial, oil prices recovered some of the losses, though the bounce lacked momentum. That could suggest the market still sees a decent chance of de-escalation, given the pressures on Trump from munitions shortfalls, elevated yields, rate hikes, sinking approval ratings, and Gulf states pushing for an end to the conflict.

During the American session, a host of Fed speakers are due, but the main event is the UN General Assembly. Trump is slated to speak around 13:30 GMT/09:30 ET, followed by meetings with numerous global leaders. The ones that matter most for the markets are those with Gulf leaders and possibly the Iranian delegation. Traders will be watching for de-escalation headlines, as those would keep oil prices under pressure, easing inflation and rate hike concerns. Conversely, hawkish rhetoric or signs of re-escalation would likely push oil sharply higher and hurt risk sentiment broadly.