Oil drops below US$90 for the first time since August, on a peace that Iran says nobody is negotiating

The price of oil has fallen below US$90 a barrel for the first time in about three months, as traders bet that the nine-month war between the United States and Iran is nearing its end.

Brent crude contracts for January delivery slipped under US$90 early on Tuesday, European time, and were trading about 2.65% lower at US$90.14 a little after 6.30pm AWST. West Texas Intermediate, the US benchmark, fell about 2.4% to US$84.78.

It is a long way from the panic of earlier this year. Brent began 2026 near US$60, spiked to as much as US$130 in March and April as the war choked shipping through the Strait of Hormuz, eased in mid-year, then climbed back towards those levels before last week’s collapse.

What changed?

Mostly, the tone from Washington. Speaking at the White House on Monday, US time, after meeting Qatar’s prime minister, Trump said he saw “momentum toward the end of this conflict” and that it would end “fairly soon”. He said Iran was “talking very politely” and that new strikes were “quite unlikely”, while keeping the option open.

Trump also said Gulf states including Qatar, Saudi Arabia and the United Arab Emirates would prefer to keep the current US naval blockade and the new task force targeting Iran’s land routes in place.

Supply is also improving. Analysts at ING said signs that regional oil flows were recovering had added to the pressure on prices, alongside reports that Iran might soften its position on control of the Strait of Hormuz.

Is a deal actually close?

That is the weak point. A senior Iranian official has said Tehran sent a proposal through Qatari mediators that demands sanctions relief and a new shipping arrangement in the strait, which Washington was reviewing. But Mohsen Rezaei, a senior Iranian security official, reportedly accused the US of inventing “imaginary talks”.

Fereidun Fesharaki, chairman of energy consultancy FGE, said on Tuesday that the two sides’ positions were so far apart they “cannot be bridged”. ING’s strategists said they expected prices to remain sensitive to developments because negotiations were uncertain and risks to energy infrastructure remained, a point underlined by Houthi missile and drone attacks on Saudi Arabia in recent days.

What does it mean for Australians?

Cheaper crude takes time to reach the bowser. Australian petrol prices follow refined fuel prices in Singapore, usually with a lag of one to two weeks, and the war has also caused a global shortage of refining capacity that has pushed diesel, petrol and jet fuel prices up faster than crude.

But the direction matters. Petrol near $2.40 a litre has been one of the biggest drags on household confidence, which fell to a four-year low this week, and fuel has fed the inflation behind five Reserve Bank rate rises this year. If oil holds below US$90, it removes some of the pressure for a sixth.

For airlines, miners and freight companies, the saving is more immediate. Australian shares closed at an 11-week high on Tuesday, helped by the falling oil price.

Why does a US$90 line matter?

It is psychological as much as economic. Brent last traded below US$90 in August, before the September and October climb back towards its wartime highs. Falling back through the level tells markets that traders now see the war’s end as more likely than its escalation, but it also leaves oil exposed to a sharp rebound if talks fail.