Explainer: Will US Midterm Election Results Bring Global Oil Prices Below $100?

(MENAFN- Khaleej Times) Global oil prices fell sharply on Wednesday, November 4, following the US midterm elections, as investors weighed whether the political shift in Washington could help bring an end to the conflict with Iran.

Brent crude futures dropped 3.09 per cent to $100.40 a barrel, while US West Texas Intermediate crude fell 3.13 per cent to $93.08 at 1417 GMT, according to Reuters.

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The price decline came after Democrats won control of both chambers of US Congress, dealing a political setback to President Donald Trump as his administration faces growing pressure over the war with Iran.

But will the election results lead to a lasting fall in global oil prices?

Stay up to date with the latest news. Follow KT on WhatsApp Channels. Why are oil prices falling after the elections?

Investors are considering whether the election results could encourage Washington to pursue a diplomatic agreement with Tehran rather than further military escalation.

Trump told the Financial Times on Tuesday that the United States had no immediate plans to launch additional strikes against Iran. The comments helped ease some concerns about further disruptions to oil supplies, although uncertainty remains over the direction of the conflict.

According to Reuters, oil markets have also been responding to hopes of progress in negotiations aimed at ending the wars in Iran and Ukraine.

However, the prospect of peace does not necessarily mean that an agreement is close. While markets are showing signs of relief, much will depend on the progress of peace negotiations, the security of shipping routes and the recovery of oil supplies from the Gulf.

Could the election results change US policy towards Iran?

The Democrats' victory gives the party greater influence over Congress, potentially increasing scrutiny of the administration's decisions on military operations and foreign policy.

However, the newly elected Congress will not take office until January 2027, and the president retains significant authority over foreign policy. The election outcome therefore does not guarantee an immediate change in Washington's approach to Iran.

Reuters reported that some Gulf governments believe Trump now has a stronger incentive to pursue a peace agreement following the election results. Qatar has also intensified mediation efforts, although a senior Iranian official told Reuters on Tuesday that Washington and Tehran remain far from reaching a deal.

For oil markets, any progress towards an agreement could help reduce fears of further supply disruptions.

Why is the Strait of Hormuz so important?

The Strait of Hormuz is a crucial shipping route for oil and gas exports from the Gulf. Disruptions to tanker movements have made it more difficult for producers to deliver energy supplies to international buyers, contributing to higher shipping costs and uncertainty in global markets.

According to ship-tracking data from Vortexa cited by Reuters, Gulf exports of crude oil, condensates and refined petroleum 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 and represented roughly three-quarters of pre-war levels.

The figures show that energy shipments remain significantly affected by the conflict. If shipping conditions improve, more oil could reach international markets, potentially easing pressure on prices.

Could oil prices fall below $100 a barrel?

Brent crude moved close to the $100 mark on Wednesday, but whether it falls below that level and remains there is uncertain.

A breakthrough in negotiations between the United States and Iran could reduce the risk of further disruptions and encourage a decline in prices. However, renewed military strikes or attacks on commercial vessels could quickly reverse the trend.

Oil prices are also influenced by global demand, production levels and the amount of crude held in storage.

Reuters reported that US crude inventories unexpectedly fell by 5.27 million barrels in the week ending October 30, according to industry data, offering some support to prices. This means that even if political tensions ease, other market factors could limit how far prices decline.

Will cheaper oil mean cheaper petrol?

A sustained decline in crude oil prices could eventually reduce fuel costs for motorists and businesses. However, cheaper crude does not automatically mean an immediate reduction in petrol and diesel prices.

Refining costs, transportation, distribution and local pricing policies all influence what consumers pay. In the UAE, fuel prices are adjusted monthly, meaning any changes in international oil markets may take time to appear at petrol stations.

Airlines and shipping companies could also benefit from lower energy costs, although those savings would not necessarily be passed on to customers immediately.

Could oil prices rise again?

Despite the latest decline, the risk of another increase remains. Any renewed military escalation involving Iran, further disruption to the Strait of Hormuz or delays in peace negotiations could push prices higher.

At the same time, weaker global demand or an improvement in energy supplies could place downward pressure on prices. For now, the market remains sensitive to developments in both Washington and the Middle East.

What happens next?

Attention will now turn to the next steps in US-Iran negotiations, the security of shipping routes and the recovery of Gulf oil exports.

Investors will also be watching how the election results influence Washington's approach to the conflict in the coming months.

Although oil prices have declined following the elections, a sustained fall will depend less on the political result itself and more on whether diplomatic progress can restore stability to global energy supplies.

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