Oil prices fall by 10% amid hopes for a swift end to the war with Iran following US midterm elections

Brent crude oil prices fell by 10 percent, reaching a two-month low, as investors speculated that a Democratic Party victory in the US midterm elections could accelerate efforts to end the war with Iran and ease pressure on oil supply.

The global benchmark plummeted to a session low of $93.22 per barrel, the lowest figure in two months, while traders analyzed the election results, which were largely viewed as a referendum on affordability and the war, which generates strong domestic aversion. Meanwhile, West Texas Intermediate also sharply dropped below the $90 mark.

The drop in prices on Wednesday triggered selling from commodity market consultants tracking trends. Prices continued to fall after Vice President J. D. Vance directly linked the Republican Party's defeat to the foreign conflict. Investors adjusted their positions, factoring in an earlier-than-expected winding down of the conflict, while Senate Minority Leader Chuck Schumer stated his intention to end the war, noting that some Republicans would support these efforts. Any progress in resolving the situation could further increase flows through the vital Strait of Hormuz.

US President Donald Trump, for his part, told the Financial Times that he has no immediate plans to escalate military action in West Asia. The average price of gasoline exceeded $4 per gallon when Americans voted on Tuesday, marking a first-ever recorded level on election day.

Ajay Parmar, Director of Energy at ICIS, noted: 'Given this election outcome and the economic situation in Iran, a deal seems more likely than not. Trump's strength is significantly diminished.'

Technical factors also fueled the oil sell-off. According to data from Bridgeton Research Group at Kpler, trend-following traders reduced long positions in Brent from approximately 73 percent to 55 percent at the start of the session. These algorithmic traders are known for exacerbating price volatility.

The elections could be a turning point in the war, which lacked an immediate foreseeable end and destabilized energy flows in West Asia, causing oil prices to rise by about 50 percent this year. Supply constraints in the Persian Gulf, coupled with escalating Ukrainian attacks on Russian refineries, also contributed to fuel price increases. Data from the US Energy Information Administration showed that domestic diesel inventories were below 100 million barrels for the first time since 2003, indicating that a truce will not bring immediate relief to the already strained global market.

However, physical prices in commodity markets have generally weakened recently, and flows through Hormuz remain close to pre-war levels. West Asian oil indicators suggest that short-term supply is outpacing demand for the first time since July, and North Sea cargo prices have also declined. Time spreads for both benchmarks have also generally narrowed, with several tightening to their lowest levels since mid-October. JPMorgan Chase & Co. reported in a study that global oil markets have returned to surplus due to recovery in West Asia, with a surplus of 1.4 million barrels per day in October.

CEO Amin Nasser stated on Tuesday during a post-results call that Saudi Aramco will maximize oil production this quarter, increasing supplies from near pre-war levels seen in October. According to sources close to the matter, the United Arab Emirates is considering building a third oil export pipeline that would transport crude oil around Hormuz.

Claudio Galimberti, Chief Economist at Rystad Energy, commented: 'Since both chambers can now pass resolutions, withhold war funding, and delay confirmations, the administration faces a shorter political timeline and greater institutional pressure to find a solution for Hormuz.'

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iol.co.zaOctober 26, 08:40

Oil prices approach six-month highs as stocks fall amid anticipation of key data

Asian stock markets showed declines on Monday, continuing the gloomy sentiment from last week. Investors were preparing for a series of central bank decisions and technology company earnings reports.

The drop in oil prices did not provide significant support after both major contracts reached a six-month high on Friday. Nevertheless, sentiment remains volatile due to fears of renewed US attacks on Iran following elections in the middle of next week.

Despite this, oil prices fell by more than one percent after rising by more than three percent on Friday. This rise was driven by concerns over supply related to crises in the Middle East and Ukraine, as well as the approaching winter in the Northern Hemisphere.

Speculations arose that Donald Trump would escalate the war against Iran after the elections scheduled for next Tuesday. Some officials warn that the months preceding the new Congress could be particularly dangerous.

AI companies face difficulties

Artificial intelligence companies continued to struggle amid concerns about the sustainability of the massive investment boom that propelled stock markets to numerous record highs in the first half of the year. Traders are increasingly worried about when the huge funds invested in this sector will start generating returns, if they will at all. Rising interest rates and bond yields call into question the financial health of these companies.

This week, financial results are expected from US giants and members of the Magnificent Seven group, such as Amazon, Microsoft, and Alphabet, as well as South Korean chip manufacturers SK hynix and Samsung. The results from Tesla and Meta, published last week, further amplified concerns about spending and contributed to stock price declines.

Steven Innes from SPI Asset Management noted: 'The AI complex remains under close scrutiny ahead of what may be the most important reporting period to date.' He added: 'Microsoft, Alphabet, and Amazon are about to take the stage, and this is not a quarter where the company can simply beat the metric and slightly raise the forecast while expecting applause. Investors demand proof now. They want to know if the billions directed towards building computational power are creating a long-term profit machine or just a shinier version of the same old capital expenditure furnace.'

Stocks in the red

All three major indices closed lower on Wall Street on Friday, and Asia followed this trend at the beginning of the current week. Seoul, often viewed as a barometer for AI trading, fell by more than one percent, while declines were observed in Tokyo, Shanghai, Hong Kong, Sydney, Singapore, and Manila.

Policy decisions are also scheduled for this week from the Federal Reserve, the European Central Bank, and the Bank of Japan. Although the Fed is expected to maintain borrowing costs, traders will seek to understand its stance after the rate hike last month, as inflation remains significantly above the two percent target.

Key figures around 4:10 (Saudi Arabia time)

The summary presented data on key financial indicators: the Nikkei 225 index in Tokyo fell by 0.4 percent to 62,441.76; the Hang Seng index in Hong Kong dropped by 0.1 percent to 23,075.02; and the Shanghai composite index fell by 0.4 percent to 3,675.40. West Texas Intermediate crude oil prices fell by 1.7 percent to $101.57 per barrel, and Brent North Sea crude fell by 1.3 percent to $115.19 per barrel.

Currency pairs showed movement: the euro against the dollar rose to $1.1223 from $1.1194 on Friday, and the pound against the dollar increased to $1.3385 from $1.3372. The dollar weakened against the yen to 156.76 yen from 156.87 yen, and the euro against the pound rose to 83.86 pence from 83.71 pence. In New York, the Dow index fell by 1.2 percent, closing at 52,215.16, and the London FTSE 100 index dropped by 0.3 percent to 10,690.36.