Oil drops below $90 for the first time since August as war fears ease

What happened

Brent crude, the international benchmark, briefly dropped below $90 a barrel on 10 November for the first time since August, and closed about 2% lower at $90.69, according to Reuters. That followed a fall of almost 6% on 9 November. The US benchmark, WTI, ended at $85.67.

The trigger was President Trump. After meeting Qatar's prime minister at the White House on 9 November, he said further military action against Iran "doesn't seem to be a very necessary thing" and that the war would end "fairly soon". He had delayed further strikes after appeals from regional leaders.

Supply has not come back

The fall in price is not explained by more oil reaching the market. Shipments through the Strait of Hormuz averaged 7.82 million barrels a day in the week to 8 November, about 46% of the prewar level of 17.14 million, according to the data firm Kpler. The US naval blockade remains in place.

The war premium

An oil price reflects not only today's supply and demand but also the risk of losing supply tomorrow. That extra, the risk premium, swells when a war looks likely to widen and shrinks when diplomacy looks likely to succeed. On 9 and 10 November it shrank. As Axel Rudolph of IG told The National, the market "still faces a significant supply risk" if tensions escalate, which is why the premium can return as fast as it went. Our oil shocks mechanic explains the chain from the oil price to inflation, and our scenario if oil stays above $100 shows what is at stake if it reverses.

Where it sits in the chain

This is Link 4, energy, feeding Link 1, inflation: cheaper oil lowers expected inflation, but central banks look at whether the earlier jump has already spread to other prices. The same day, US data suggested it has (our story).

What to watch

• Any date for US–Iran talks, and shipping through Hormuz.
• Ukraine–Russia talks in Abu Dhabi: an easing of sanctions on Russia could add supply.
• OPEC+ decisions on output.