Brent rises 0.5% as US-Iran tensions flare ahead of midterm elections
Key Facts
Brent futures rose 48 cents, or 0.5%, to $105.25 a barrel by 01:04 GMT on Nov. 3, while West Texas Intermediate crude gained 47 cents, or 0.5%, to $96.93. The move followed a report of US strikes on Iranian targets in the Strait of Hormuz, on the eve of the US midterm elections. A US official told the Associated Press that the United States had carried out "defensive strikes on some Iranian targets in the Strait of Hormuz." Iranian television reported hearing explosions on Qeshm Island, but the official referred to targets in the strait. The official said the strikes targeted Iranians using surface-to-air missiles against US assets, and appeared limited rather than a return to all-out fighting.
Oil's rise followed a session of sharp losses: Brent ended Monday's trading down $8.66, or 7.63%, at $104.77 a barrel. Reuters reported that optimism about the possibility of a US-Iran peace deal weighed on crude in that session, before the strike report restored a risk premium to prices. In US equity markets, the S&P 500 fell 0.51% to 7,541.40 points, while the Dow Jones rose 0.41%. The moves came as investors watched for any impact of escalation on energy supplies and shipping through the Strait of Hormuz. Gasoline prices and the war's economic fallout were a vulnerability for Republicans as they sought to retain control of Congress, according to the Associated Press.
On the political front, Axios reported, citing sources, that CIA Director John Ratcliffe, Treasury Secretary Scott Bessent and Secretary of State Marco Rubio advised President Donald Trump to maintain a "no war, no deal" posture and continue the economic pressure campaign against Iran. The agency declined to comment on the report. Trump told Axios he was in no hurry to decide whether to resume fighting. Separately, Qatari mediators drafted a proposed agreement with a three-day sequence of confidence-building measures aimed at restarting direct talks between Washington and Tehran, according to regional sources cited by Axios. Two regional officials told the Associated Press that Qatari mediators held two rounds of talks with Iranian officials in the previous week. The mediators are seeking a framework under which Iran would halt its attacks in the strait in exchange for the United States lifting its blockade of Iranian ports, with further talks planned during the week.
Attention is also turning to the midterm elections, but the timing of knowing which party will control Congress is uncertain, and results may take days to be called. All 435 House seats and 35 Senate seats are contested, and control of the House requires 218 seats. According to the Associated Press, 219 members currently align with Republicans in the chamber, one seat above the minimum for a majority if all seats are occupied, with two seats vacant. In the 2022 elections, the agency called control of the Senate four days after Election Day and the House after eight days. The outcome may be delayed by vote counting: in California, only half the votes had been counted the day after the 2022 election, while ranked-choice runoff rounds can also delay the declaration of winners in Alaska and Maine.
The Associated Press says it does not make predictions about winners and calls a race only when no scenario remains in which trailing candidates could overcome the margin. The elections come as the cost of the war and gasoline prices pose a political challenge for Republicans seeking to retain control of Congress, according to the agency. On economic data, the US Bureau of Labor Statistics calendar lists the September job openings report for Nov. 3 at 10:00 a.m. local time. The October report is scheduled for Dec. 1 at 10:00 a.m. August data showed job openings were roughly steady at 7.1 million, hires at 5.2 million and total separations at 5.1 million. The September report is among the data markets are watching to assess conditions in the US labor market.
In broader diplomatic moves, Chinese Foreign Ministry spokeswoman Mao Ning said Beijing would send a special envoy to Iran, Oman and Saudi Arabia in early to mid-November. The September jobs report is due before the October report, while Qatari efforts to restart direct US-Iran talks continue. The developments combine a negotiating track still under preparation with a military escalation the US official described as limited and defensive. Oil prices in Asian trading remained above the previous session's settlement after Monday's drop, which came amid optimism about the possibility of a deal. The outcome of the congressional elections also remains contingent on completing the count and the agency determining that the margin can no longer be overcome.