Oil Pulls Back From Multi-Month Highs, but Brent Holds Above $110 as Hormuz Standoff Drags On

Oil retreated from multi-month highs on Monday 26 October as regional talks with Iran began, but Brent stayed above $110 a barrel by most accounts. The Strait of Hormuz standoff is still unresolved, so inflation risk, the US dollar and the Fed remain tied to every headline from the Gulf.

Below, we cover what moved oil, where talks stand, and what traders may want to watch this week.

Oil Pulls Back From Multi-Month Highs

Brent climbed to around $117 a barrel last Friday after fresh Houthi attacks on Saudi Arabia, its highest level in months. On Monday, prices fell from levels that Euronews described as near wartime highs, on hopes that hostilities could ease. US West Texas Intermediate (WTI) fell about 2.2% to $101.04, Reuters reported.

Reports differed on how far Brent fell during the session, with prices quoted anywhere from about $110 to $116. Fortune's tracker put Brent at $115.41 on Monday morning, up about 13% in a month and 75% in a year. Either way, crude remains far above where it was before the war began in late February.

Why Prices Jumped Last Week

The surge came from Saudi Arabia. Houthi rebels, an Iran-aligned group, attacked airports and energy facilities in the kingdom, the world's largest oil exporter, according to Anadolu, and prices jumped on the supply fears. Attacks on shipping around Hormuz and the Red Sea have also kept insurers and shippers on edge.

This fits the pattern we covered earlier this month. Every attack on Gulf infrastructure adds to the risk premium in oil, and every sign of diplomacy takes some of it out.

Talks Begin, but Positions Stay Far Apart

The mood shifted over the weekend. Iran hosted regional security talks with Saudi Arabia, Turkey and Pakistan on 26 October, and the officials agreed to keep talking, according to a daily conflict tracker. CBS News live updates described the talks as an attempt to stop the war from reigniting, and Euronews said President Donald Trump was weighing a deal with Tehran.

The message from Washington was mixed. At a rally in Corinth, Mississippi, Trump called an earlier ceasefire with Iran "a waste of time", and said he had expected oil to rise far higher during the conflict and was prepared for it, according to Iran International. CNBC has reported that Iran has claimed throughout the war that it controls Hormuz and has declared the strait closed several times. With both sides still far apart, markets are treating the talks as hopeful but unproven.

Is Hormuz Really Flowing Again?

Trump claimed, citing the Wall Street Journal, that oil coming out of the strait now tops pre-war levels. The data is more nuanced. Kpler estimates that Gulf crude exports excluding Iran returned to their pre-war average in September, but 40% now leave without crossing Hormuz, compared with 17% before the war, mainly through Saudi and UAE pipelines. Kpler also says confirmed crude crossing the strait itself is still more than a quarter below pre-war levels.

In other words, supply has recovered mainly by finding new routes, not because the strait is back to normal. Iranian exports are a separate issue. Kpler's figures exclude Iran, whose own crude exports have fallen sharply under the US naval blockade.

A Longer Shadow Over Energy Markets

The supply picture is not expected to snap back quickly. International Energy Agency head Fatih Birol told the Singapore International Energy Week conference on Monday that he sees no credible pathway for markets to return to pre-war conditions next year, and said oil prices were close to $120 a barrel. Saudi Arabia and Singapore also announced plans for Saudi crude to be stored at Singapore's Jurong Rock Caverns from the second half of 2027, according to Arab News. The arrangement is still at the memorandum-of-understanding stage and adds no barrels in the near term, but it shows producers planning for continued disruption.

For traders, that means the oil market is likely to keep carrying a risk premium even if talks make progress.

What It Means for Inflation, the Dollar and the Fed

Oil is the link between the war and your trading screen. Fuel costs were the main driver of the September US CPI report, where gasoline rose 9.1% in a month and annual inflation reached 3.7%. With Brent still above $110, that pressure is not fading.

That matters because the Fed is meeting on 27 and 28 October. Higher energy prices make it harder for policymakers to argue that inflation is temporary, and they support the case for further tightening later this year. A firmer rate outlook has been a key support for the US dollar, which touched an 18-month high after the CPI release.

Which Markets Are Most Exposed

• Crude oil: Brent and WTI react first to Hormuz, Houthi and diplomacy headlines.
• The US dollar: Higher oil and inflation support rate expectations, which tends to lift the dollar index.
• Gold: It balances safe-haven demand against a stronger dollar and higher yields.
• Energy importers' currencies: Economies that buy most of their fuel abroad come under pressure when oil stays high.
• Stock indices: Higher fuel costs and rate fears weigh on growth stocks and transport-sensitive sectors.

What to Watch This Week

• Follow-up talks: Whether the Saudi, Turkish and Pakistani effort leads to a formal meeting or a reduction in attacks.
• Hormuz and Red Sea incidents: Any new strike on tankers or energy sites can reverse Monday's drop quickly.
• The Fed decision and press conference: The wording on inflation and energy will shape expectations for December.
• US midterm elections on 3 November: Trump has said he is prepared for higher oil prices, but fuel costs are a political issue.
• Saudi supply and Houthi attacks: Another hit on Saudi facilities could send Brent back toward last week's highs.

Oil can swing several dollars on a single headline, so many traders plan position sizes and exit levels before major events rather than after.

The Bottom Line

Oil has pulled back from multi-month highs, but not by much. Brent is still above $110, talks have only just begun and both Washington and Tehran are sending mixed signals. Supply is recovering through pipelines and new routes, yet the Strait of Hormuz remains the market's main pressure point.

With the Fed decision, the US midterms and fresh Gulf headlines all ahead, oil, the dollar and gold are likely to stay sensitive to every update.

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