Oil prices drop more than 8 percent after Democratic midterm gains raise Iran war exit hopes

Brent crude fell more than 8 percent on Wednesday to settle near $94.50 a barrel after Democrats won control of both the House and the Senate in the US midterm elections.

West Texas Intermediate closed around $88. The drop continued into Thursday, with both benchmarks trading below $94 and $87 respectively. The move was the largest single-day decline since May. Energy shares also fell. The S&P Energy index dropped nearly 5 percent. Traders linked the sell-off to expectations that a Democratic Congress will constrain further escalation in the US-Israeli conflict with Iran and increase pressure for a negotiated exit.

Vice President JD Vance wrote that the war was the reason Republicans lost. President Trump acknowledged the point was largely true but said he would make the same decision again. Higher petrol prices had already affected voter sentiment. Disruptions around the Strait of Hormuz had reduced flows, though shipments recovered to roughly three-quarters of pre-war levels in October. US crude inventories fell by 865,000 barrels in the week to 30 October, according to the Energy Information Administration, providing some counter-support.

Analysts noted that a full resolution remains uncertain. Some warned that the election outcome could instead prompt Trump to escalate before a new Congress takes power. Others said the political shift raises the odds of diplomacy. Distillate stocks fell sharply, and commercial inventories in major consuming countries sit near 15-year lows. Any restoration of Middle East flows would ease tightness, but the path depends on decisions in Washington, Jerusalem and Tehran.

The price move also reflected positioning. Speculative length had built on geopolitical risk. The midterm results triggered rapid covering. European gas prices declined on related hopes of improved LNG flows. Whether the lower oil prices persist will depend on the next steps in the Iran conflict and on how quickly any de-escalation materialises. For now, the market has removed a substantial portion of the war premium that accumulated earlier in the year.