Oil dropped Wednesday, putting prices on track for their largest one-week decline since 2020 Oil prices dropped Wednesday, putting them on track for their largest one-week decline since 2020, as investors weigh the odds that a Democratic sweep in the U.S. midterm elections could lead to a quicker end to the Iran war. Democrats won control of both the House of Representatives and the Senate, and are expected to challenge Republican President Donald Trump’s handling of the U.S.-Israel war with Iran. Oil prices saw a steep drop in response, while U.S. benchmark stock indexes rallied on Wednesday.
That makes the “political price of continuing the conflict too steep for the White House,” he added. Global oil prices lost nearly 9% Wednesday to settle at $94.62 a barrel — taking their week-to-date loss to almost 17%, which would be the worst weekly decline for Brent crude since April 24, 2020, according to Dow Jones Market Data. U.S. benchmark West Texas Intermediate crude settled at $88.12, down about 8% for the session and trading 15% lower week to date.
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Oil is in “freefall” as markets price in a faster path to restored Strait of Hormuz crude flows, rather than another round of escalation, according to Raj. U.S. benchmark stock indexes were broadly higher as the election outcome removed some political uncertainty, with the Dow Jones Industrial Average up 2.9%, the Nasdaq Composite gaining 2.1% and the S&P 500 climbing 1.9%. Democrat congressional control over military spending provides a new “vector to influence foreign policy,” said Jeremy Richardson, senior portfolio manager, global equities, at RBC Global Asset Management, in a note to clients.
Arguably, “the midterms have increased incentives for agreeing to a ceasefire which, if delivered, would provide relief to energy prices, inflation, interest rates, and corporate earnings,” he wrote. But the reality of a diplomatic solution in the near term to the Iran war, may still remain quite distant, said Jordan Rizzuto, managing partner and CIO at GammaRoad Capital Partners. Prices for oil had taken a dive earlier this week, with Brent and WTI both losing more than 7% on Monday on reports of indirect mediation efforts between the U.S. and Iran.
In a post on X Wednesday, U.S. Vance blamed the Republican losses on the Iran war. His “blunt admission that the war cost Republicans the election only poured gasoline on the fire,” said Velandera Energy’s Raj.
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