Oil prices slide over 8% as US election result raises hopes of Iran peace deal

• Brent settled at $94.62 a barrel and US crude at $88.12, their lowest closing levels since August 31.
• Democratic gains in Congress fuelled expectations of tighter limits on US military action and renewed efforts towards a deal.
• Qatar intensified mediation, while uncertainty over further escalation continued to weigh on the outlook.

Oil prices dropped more than 8 percent on Wednesday as investors assessed whether the Republican Party’s loss of control of the US Congress could accelerate efforts to end the US-Israeli war with Iran.

Brent crude futures fell $8.98, or 8.7 percent, to settle at $94.62 a barrel. US West Texas Intermediate crude declined $7.97, or 8.3 percent, to $88.12. Both benchmarks recorded their lowest closing prices since August 31, more than two months earlier.

The sell-off followed Democratic victories in both the House of Representatives and the Senate, which raised expectations that President Donald Trump would face greater constraints on military action and stronger pressure to pursue a negotiated settlement.

Two sources close to Gulf government circles said a weakened Trump had more incentive to seek an agreement, making a full-scale assault on Iran appear less likely. However, Gulf analysts cautioned that a settlement allowing Iran to claim a clear victory, while leaving Trump looking defeated, could also encourage a reckless response.

Trump told the Financial Times on Tuesday that Washington had no immediate plans to strike Iran. On Wednesday, he acknowledged that the war had contributed to his party’s sweeping defeat in the midterm elections.

Dennis Kissler, senior vice president of trading at BOK Financial, said Democratic control of Congress could restrict US military spending in the Middle East and improve the prospects of an earlier peace agreement. He added that larger crude exports from the region, alongside Trump’s comments about having no immediate plans for strikes, were putting further pressure on prices.

US Vice President JD Vance also distanced himself from the decision to enter the war, questioning whether it had been worthwhile and blaming the conflict entirely for the electoral setback that handed Democrats control of Congress.

Qatar, meanwhile, intensified mediation efforts to prevent a renewed escalation following the elections. Despite those efforts, a senior Iranian official told Reuters on Tuesday that Tehran and Washington remained far from an agreement to end the war.

Carl Larry, who leads trading and North America risk at Enverus, said the election outcome had given bearish traders a reason to question whether the conflict would continue. He nevertheless expressed greater concern about a near-term escalation than confidence in a resolution.

In a written statement, Iran’s Supreme Leader Ayatollah Mojtaba Khamenei said US hostility towards Iran would continue regardless of which political party held power. Yemen’s Houthis separately claimed to have targeted King Khalid International Airport in Riyadh, although Saudi authorities had not confirmed the claim.

Shipping data showed that Gulf exports of crude oil, condensate and refined products, excluding liquefied petroleum gas, averaged 17.1 million barrels per day in October. That was down from 18.9 million barrels per day in September but still around three-quarters of pre-war levels, according to Vortexa.

The United Arab Emirates is considering a third oil pipeline to transport crude through a route outside the Strait of Hormuz, Bloomberg reported, citing people familiar with the matter. The proposed project would help reduce the country’s reliance on the waterway.

In the United States, Energy Information Administration data showed that crude oil, gasoline and distillate inventories all declined last week.

Crude stocks fell by 865,000 barrels to 409.8 million barrels in the week ending October 30, compared with analysts’ expectations in a Reuters poll for an increase of 877,000 barrels.