Iran threatened with new weapons while the Houthis bragged about more Saudi attacks on Saudi Arabia: File Image/Pixabay

The increasingly familiar and arguably naïve hope among investors that a return to diplomatic progress between the U.S. and Iran would prevail this week caused oil prices on Monday to drop by over 4 percent – even though both sides continued issuing threats on Sunday.

The optimism derived from the impending visit to the United Nations of Iranian president Masoud Pezeshkian, and U.S. president Donald Trump stating he would be open to meeting him.

Bob Yawger, director of energy futures at Mizuho, said, "Just a couple days ago that would have seemed like ⁠a very far-flung idea; it's a move in the right direction."

As a result, Brent settled down $3.53, or 3.4 percent, at $100.34 per barrel; West Texas Intermediate settled down $4.52, or 4.5 percent, to $95.78 per barrel.

Also affecting trading on Monday was Saudi Aramco, which loaded about 14 million barrels of crude on seven supertankers inside the Mideast Gulf ‌on Sunday; satellite data showed that Saudi oil transiting the Strait of Hormuz averaged 2.9 million barrels per day (bpd) over the past six days, up from just 700,000 bpd in August.

Another development widely perceived as promising was China, which according to Iranian sources asked the Islamic republic to help curtail the Houthis at the request of Riyadh.

Still, it’s unclear if the optimism will last long enough for oil prices to fall much further: the Houthis claimed to have attacked Riyadh as well as a Saudi ‌Aramco facility in the Red Sea city of Yanbu with cruise and ballistic missiles plus drones; as for diplomacy with Iran, on Monday its leaders warned https://www.foxnews.com/live-news/iran-war-donald-trump-strait-of-hormuz-09-21 that it would deploy new weapons and expand the geography of the conflict if the U.S. launches another offensive.

For his part, Trump told media he was still weighing three options: “Wipe it out, let it rot with the economy, or make a deal."

In other oil news on Monday, output at the Sharara field, Libya’s largest oil field, was cut by more than half after an armed group shut  a pipeline running to the Zawiya export terminal; the field is capable of pumping about 127,000 bpd.

Also on Monday, Hungary under the new leadership of prime minister Peter Magyar asked
Washington not to levy tariffs on the central European country, which still buys oil from Russia.

Marton Hajdu, chair of the Foreign Policy Committee in Hungary’s parliament, said in a Facebook post that he also asked U.S. lawmakers of both sides of the aisle to “help Hungary reduce its reliance on Russian energy and ensure its energy supply from multiple sources.”

Hungary is one of the biggest importers of Russian crude oil, following China, India, and Turkey.