Oil prices stabilized during Asian trading on Thursday after suffering losses of more than 8% in the previous session, as investors assessed the possibility of easing tensions between the United States and Iran.
The sharp decline followed the Democratic Party’s sweeping victory in the US midterm elections, which increased expectations that President Donald Trump could face greater political pressure to pursue a diplomatic resolution to the Iran conflict.
However, uncertainty surrounding the geopolitical outlook continued to influence global energy markets.
Oil Prices Stabilize After Sharp 8% Selloff
Brent crude oil futures for January delivery edged up 0.1% to $94.69 per barrel as of 07:29 GMT.
Meanwhile, US West Texas Intermediate (WTI) crude futures declined 0.7% to $87.51 per barrel.
The relatively modest movements followed Wednesday’s substantial selloff, when Brent crude plunged $8.98, or 8.7%, to settle at $94.62 per barrel.
Similarly, WTI crude dropped $7.97, representing an 8.3% decline, to close at $88.12 per barrel.
Both major oil benchmarks finished the previous session at their lowest levels since August 31, highlighting the significant change in investor expectations surrounding energy supplies.
US Midterm Elections Raise Hopes of Iran Peace Agreement
The Democratic Party’s victory in both chambers of Congress has introduced fresh uncertainty surrounding the Trump administration’s military strategy toward Iran.
With Democrats gaining greater congressional influence, investors anticipate increased pressure on the White House to reduce military involvement and pursue negotiations.
A Democratic-controlled Congress could potentially challenge funding for military operations, making further escalation more politically difficult.
President Trump acknowledged that the conflict with Iran contributed to his party’s election defeat.
Meanwhile, Vice President JD Vance raised concerns about the war’s economic and political consequences.
These developments encouraged expectations that Washington could eventually prioritize a negotiated settlement.
As a result, oil prices fell sharply as traders reassessed the possibility of prolonged disruptions to global energy supplies.
Strait of Hormuz Oil Flows Remain a Key Market Concern
The potential for reduced military tensions has important implications for the Strait of Hormuz, one of the world’s most strategically significant oil transportation routes.
The shipping passage connects the Persian Gulf with international energy markets and plays a crucial role in global crude oil trade.
A diplomatic resolution could improve shipping conditions and reduce the risk of supply interruptions.
Consequently, traders have begun reducing the geopolitical risk premium previously reflected in crude oil prices.
President Trump has indicated that the United States does not currently intend to conduct additional military strikes against Iran.
Nevertheless, US forces carried out limited strikes on Iran’s Qeshm Island earlier in the week, describing the operations as defensive.
The situation therefore remains uncertain, with further military developments capable of influencing oil prices.
ING Analysts Warn Oil Market Selloff May Be Excessive
Analysts at ING suggested that crude oil prices could continue gradually declining if geopolitical tensions ease and oil shipments from the Persian Gulf remain uninterrupted.
According to their assessment, the market may progressively surrender the additional risk premium accumulated during recent months.
However, the bank also cautioned against assuming that the conflict will end without further complications.
ING analysts noted that considerable uncertainty remains surrounding the political and military outlook.
They also suggested that the speed and magnitude of the recent oil price decline may have been excessive, given the unresolved risks.
This assessment indicates that further price volatility remains possible despite growing expectations of diplomatic progress.
US Crude Oil Inventories Fall Less Than Expected
Meanwhile, fresh US inventory figures provided additional insight into energy market fundamentals.
According to the Energy Information Administration (EIA), US crude oil inventories declined by 865,000 barrels during the week ending October 30.
However, analysts had anticipated a substantially larger decrease of 1.7 million barrels.
The smaller-than-expected draw suggests that crude oil supplies remained more abundant than markets had forecast.
Gasoline inventories also declined by 222,000 barrels, contrasting with expectations for a modest increase.
Additionally, distillate inventories, including diesel and heating oil, dropped by 3.565 million barrels.
The larger reduction in distillate supplies highlighted tighter conditions in certain refined petroleum product markets.
These mixed inventory figures add another consideration for traders assessing the balance between energy supply and demand.
Oil Price Outlook: Geopolitical Risks Remain in Focus
Oil prices remain sensitive to developments surrounding the Iran conflict, US political decisions, and global energy supply conditions.
Although the Democratic midterm victory has increased expectations of potential de-escalation, a diplomatic agreement remains uncertain.
The possibility of improved shipping conditions through the Strait of Hormuz could reduce supply concerns and place additional pressure on crude oil prices.
However, renewed military tensions could quickly reverse market sentiment and restore some of the geopolitical risk premium.
At the same time, US petroleum inventories and global demand trends will continue influencing the broader energy outlook.
For now, Brent and WTI crude remain near their lowest levels since late August as investors evaluate whether the recent sharp selloff signals a lasting change in oil market conditions.
