Brent Falls 8.7% to $94.62 on Bets for Iran War De-escalation
Key Facts
Brent futures closed 8.7% lower at $94.62 a barrel on November 4, their lowest close since August 31, according to Reuters. The drop came as investors bet that Democrats’ gain of control of the U.S. Congress could accelerate an end to the U.S.-Israeli war with Iran. Democrats won both the House and Senate in the 2026 midterm elections, according to the report. But that bet reflects an expectation about the political path and does not mean a deal to end the war is imminent. Futures fell alongside West Texas Intermediate, which dropped 8.3% to $88.12 a barrel, also its lowest close since August 31.
Dennis Kissler of BOK Financial linked the shift in control of Congress to the possibility of tighter restrictions on U.S. military spending in the Middle East. He said that could “increase the likelihood of reaching a peace deal sooner,” supporting bets on a reduction in war-related risks. Gulf analysts, however, warned that a deal that appeared to be a defeat for President Donald Trump could push him toward recklessness as much as restraint. The report quoted an Enverus analyst as saying he feared escalation more than an imminent settlement. “I am more concerned about the possibility that we could see escalation in Iran before a resolution,” he said, suggesting the political outcome could leave the course of the war open to more than one possibility.
In an effort to contain that possibility, Qatar stepped up mediation efforts to avert renewed attacks after the election, according to Reuters. But a senior Iranian official told the agency that Washington and Tehran remained far from an agreement to end the war. That distance limits the scope to treat the price drop as evidence that a settlement is near, even as investors priced in the possibility that the shift in the balance of power could lead to a less escalatory path. Sources close to Gulf government circles said Trump’s weakened position against a Democratic Congress could increase his incentive to reach a deal and make an all-out attack on Iran less likely. The new Congress, however, does not take office until January, meaning any direct effect of the shift in legislative control on U.S. policy would not be immediate.
Regional flows provide another context for the market’s sensitivity to the course of the war. Gulf exports of crude, condensate and refined products, excluding liquefied petroleum gas, averaged 17.1 million barrels a day in October, down from 18.9 million in September, according to data cited by Reuters. Exports remained at about three-quarters of prewar levels. A resolution to the conflict could restore Middle Eastern oil flows disrupted by the war, but the diplomatic path remains fraught with uncertainty, according to Reuters. JPMorgan, meanwhile, estimated that the oil market returned to a surplus of 1.1 million barrels a day in September, with the surplus widening to 1.4 million in October, close to the previous year’s average of 1.3 million; a backdrop that intersects with the supply risks that have kept the war central to crude pricing.
On the U.S. supply front, the Energy Information Administration said crude inventories fell by 865,000 barrels to 409.8 million barrels in the week ended October 30. The draw ran counter to forecasts by analysts polled by Reuters for an increase of 877,000 barrels, but did not prevent a sharp decline in crude during the November 4 session. Markets are awaiting the U.S. employment situation report for October, scheduled for release on November 6, according to the Bureau of Labor Statistics calendar. The next weekly Energy Information Administration report on the petroleum situation is due November 12, after the schedule was adjusted because of the federal government closure on November 11. Against the backdrop of supply risks, the agency said tanker transit risks had raised shipping and insurance costs and added a risk premium to oil prices, and that continued disruption to flows could increase price volatility in the short term.