Crude remains a headline-driven market, and the intraday range shows how quickly hopes and rejections on Iran diplomacy are being priced in both directions. The tone of the mediated talks is the main swing factor: a credible path to reopening Hormuz risks a sharp leg lower, while a breakdown would likely push supply risk back towards the early-session highs. Physical tightness limits how far dips can run, with flows through the strait still below pre-conflict levels and record freight costs adding to delivered prices. The wider Brent premium over WTI and the US diesel export debate suggest product tightness, not just crude supply, is now shaping price relationships.---Oil closed marginally higher after a whipsawing session, with Iran peace headlines capping the upside while undersupply and soaring diesel prices limited the downside.Summary:Brent settled up about 1% at around $105 a barrel and WTI rose about 20 cents to around $93, after prices jumped more than $4 in early trade when Trump rejected Iran's proposal to reopen the Strait of Hormuz.Gains faded as Qatari mediators were expected to hold separate talks with Iran and the US on Monday or Tuesday, and conflicting reports on a possible nuclear deal took WTI and Brent to lows of around $91 and $96.Middle East crude exports rebounded to nearly 13 million bpd in September, the highest since the war began in February, but UBS said flows remain below pre-conflict levels and the market is undersupplied.Saudi Aramco is considering discounts of around $9 a barrel on crude loaded off Oman to offset record freight rates.The White House is considering wider red-dyed diesel sales to curb fuel prices, and talk of a possible diesel export ban pushed the Brent premium over WTI to its highest since May.Oil prices settled slightly higher on Monday as supply disruption worries outweighed hopes for a diplomatic breakthrough, after US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz. Brent futures finished up around $1, or about 1%, at around $105 a barrel, while US West Texas Intermediate rose about 20 cents to settle at around $93.The session was choppy. Prices jumped more than $4 a barrel in early trade after Trump turned down the proposal, then pared gains on expectations that Qatari mediators would hold separate talks with Iran and the US. An official briefed on the negotiations told Reuters that mediators would meet Iranian Foreign Minister Abbas Araqchi in New York and the US side on Monday or Tuesday, with the discussions expected to focus on an amended version of a seven-day proposal Iran presented last week on the sidelines of the UN General Assembly. Later reports added to the confusion. One said Iran had agreed to halt enrichment in exchange for easier US sanctions, which sent WTI and Brent to lows of around $91 and $96, before further reports said the chances of an agreement were extremely slim, with wide gaps and significant obstacles. A US official said talks were continuing through intermediaries and that there would be no deal without addressing the nuclear issue, while Trump was reportedly prepared to ease sanctions and release frozen Iranian assets in exchange for progress on it. Araqchi's stay in New York was reported not to have been extended, and Trump told Axios on Sunday that he expected more talks this week. Saudi Foreign Minister Prince Faisal bin Farhan also arrived in Washington for talks with Secretary of State Marco Rubio, amid escalating hostilities between Riyadh and Yemen's Iran-backed Houthis.On the supply side, preliminary Kpler data showed crude exports from key Middle East producers rebounded in September to nearly 13 million barrels per day, the highest since the war began in February, as Saudi Arabia and the UAE lifted shipments. Shipments through Hormuz were on track for around 7.5 million bpd this month. Saudi Arabia diverted exports from Yanbu to Ras Tanura after attacks damaged its East-West pipeline, although another report said the pipeline had resumed exports, which weighed on prices. UBS said flows remain below pre-conflict levels despite more vessel traffic, leaving the market undersupplied. About a fifth of the world's oil supply, roughly 20 million bpd, passed through the strait before the US and Israel attacked Iran in February. Separately, Saudi Aramco is considering discounts on official selling prices for crude loaded off Oman to offset record freight rates, with talks with Asian refiners on second-half October cargoes involving a potential discount of around $9 a barrel.Fuel prices were the other pressure point. Futures briefly turned negative during the session as the Trump administration took steps to lower diesel and gasoline prices (ps. Goldman Sachs: A US diesel export ban would backfire on gasoline prices ). The White House is considering regulatory relief for broader sales of red-dyed diesel, according to sources, and the US Transportation Department finalised sharply lower vehicle fuel economy standards. Talk of a possible US diesel export ban (also ps. Goldman: US diesel export ban would cut US prices about 4%, lift European cost (d'uh) ) after record diesel prices has widened the premium of Brent over WTI to its highest since May, for the third time in four sessions, a sign that markets expect US refiners to process less crude if diesel stays at home. Goldman Sachs said Europe and especially Latin America are the key destinations for US diesel exports, and that a tightening shock would likely spread quickly worldwide. Diesel prices have surged on supply disruptions linked to the wars in the Middle East and Ukraine, along with export bans in Russia and China. Moscow imposed its ban to protect domestic supply after Ukrainian attacks on refineries, and Ukrainian President Volodymyr Zelenskiy said Ukraine's military struck Russian oil facilities in the Krasnodar region on Monday.Traders will now watch whether the Qatari-mediated talks produce any movement on the Strait of Hormuz, and how Saudi export flows and US diesel policy develop. This article was written by Eamonn Sheridan at investinglive.com.