Oil Settles Lower as Saudi Restarts East-West Pipeline

Brent crude settled at $99.25 a barrel on Tuesday, down $1.09, or 1.09%, as rising Saudi crude flows through the Strait of Hormuz added supply to a market still shaken by the US-Israeli war on Iran.

The WTI October contract, which expired on Tuesday, finished at $94.99 a barrel, down $1.19, or 1.24%. Both benchmarks traded more than $2 lower at session lows before paring losses.

The recovery came after US President Donald Trump dashed expectations of an imminent peace agreement. He said a deal would come only after the US midterm elections in early November. Trump also said that without a peace deal he could "annihilate" Iran. His comments punctured hopes that an agreement could emerge from this week's UN General Assembly meeting in New York, which he is expected to attend alongside world leaders.

The diplomacy track still has momentum. Trump's UN schedule had fed hopes for Middle East stability and even progress toward ending Russia's 4-1/2-year-old war in Ukraine. A senior Iranian official told Reuters on Tuesday that Iran can reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade on Iranian ports. The official said Iran's delegation to the UN General Assembly has full authority to revive diplomacy with the US.

"The Iranian comments were a sign that diplomacy efforts could be working," said Hamad Hussain, senior climate and commodities economist at Capital Economics.

The day's supply picture explains the selloff. Flows through the Strait of Hormuz — the chokepoint that handled 20% of global oil and LNG supply before the war began in late February — have increased in recent days. Saudi Arabia has restarted operations at its East-West Pipeline and could resume exports from Yanbu port later on Tuesday, according to three sources briefed on the matter.

"Saudi Arabia is acting, not waiting," said Phil Flynn, senior analyst at Price Futures Group. "After Houthi hits on the East-West pipeline forced a shutdown of Yanbu loadings, Aramco loaded about 14 million barrels of crude onto seven VLCCs inside the Gulf. Satellite and tracker data showed Saudi oil moving through Hormuz averaging about 2.9 million barrels a day over the last six days, up from roughly 700,000 barrels a day in August."

That fourfold jump in Saudi flows through Hormuz, from roughly 700,000 barrels a day in August to about 2.9 million over the last six days, marks the most concrete sign yet that Riyadh is restoring export capacity damaged in the Houthi attacks on the East-West Pipeline. The restart of Yanbu loadings would add a second export route on the Red Sea side, further loosening the supply squeeze.

The market now faces two competing timelines. Trump has tied any peace deal to the political calendar, pushing a resolution past the November midterms. Iran, by contrast, has offered a seven-day pathway to reopening Hormuz — conditional on US military de-escalation and the lifting of port blockades. The gap between those positions, and the pace at which Saudi flows keep recovering, will set the floor under crude prices in the weeks ahead.