Oil prices plunged Friday sharply on easing strains in the Middle East after a slightly stunning turn of events. Saudi Arabia is executing a partial cease-fire in Yemen, rumors spread that the U.S. is contemplating easing penalties on Iran, and Saudi Arabia is poised to restore disturbed production from the damaged Abqaiq facility.
Riyadh has moved to force a partial cease-fire in Yemen. The step comes a week after Houthi forces announced a unilateral cease-fire. If the partial laying down of arms proves sturdy, Saudi Arabia might broaden the cease-fire to different parts of Yemen.
The event follows the decision by Saudi Arabia and the U.S. not to hit Iran in response to the strike on Abqaiq. “President Trump’s decision to abandon military retaliation opens a wide window lasting days to weeks during which diplomacy shall be prioritized,” Rapidan Energy mentioned in a note on September 22. Since there has been on military retaliation, it has become clear in Tehran that neither Riyadh nor Washington have an appetite for battle. Iran could attempt to capitalize on that by making moves to ratchet down strains.
Iranian President Hassan Rouhani further claimed Friday that the U.S. offered to take down oil sanctions if Iran returned the discussion table. The State Division’s special advisor on Iran Brian Hook shortly bat down the thought that the U.S. offered sanctions relief, and Trump himself took to Twitter to dismiss the statement.