Oil prices fell sharply on Wednesday, November 4, after US Vice President JD Vance blamed the war against Iran for the Republican Party's losses in the US midterm elections.
US West Texas Intermediate (WTI) crude oil futures fell nearly 9% to $87.59 per barrel by 12:36 pm ET on Wednesday.
Brent crude futures, the international benchmark for oil prices, also dropped more than 9% to $93.91 per barrel.
Deep Dive
Why did oil prices fall after the US midterm elections?
Why did JD Vance say the Iran war contributed to Republican losses?
Did Donald Trump agree with JD Vance about the Iran war and election losses?
Vance directly linked the Republican Party's election defeat to the war against Iran in a social media post on Wednesday. “The reason we lost is the war,” Vance said in the post. He also pointed to Trump's own comments, saying, “The president himself said so last night.”
Democrats won major victories in Tuesday's elections, sweeping both the US House of Representatives and the Senate. The election results have given Democrats greater power to challenge President Donald Trump's decisions, including his handling of the war against Iran. Democrats could now put pressure on Trump to end the war, which has become unpopular and has pushed up petrol and diesel prices in the US.
Oil market experts believe the election results could increase the chances of the US reaching a deal with Iran and reducing tensions in the region.
{{/usCountry}}Oil market experts believe the election results could increase the chances of the US reaching a deal with Iran and reducing tensions in the region.
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“The elections are leading the market to conclude that Trump might now be inclined to make a deal,” Andy Lipow, president of Lipow Oil Associates, said. Lipow said Democrats could also try to restrict funding for the war, making it harder for the Trump administration to continue its military campaign.
He also pointed to Trump's announcement earlier this week that the US would cut some of its funding to Israel, according to CNBC. According to Lipow, this decision could put pressure on Israel to accept Washington's decisions on the conflict.
Trump told the Financial Times on Tuesday that he had no immediate plans to launch strikes against Iran. Before the latest fall in prices, oil markets had been preparing for the possibility of a major military escalation after the midterm elections. This concern had pushed oil prices up by more than 10% in October as traders worried that the conflict could become worse.
Oil prices fall over 14% this week
Oil futures have fallen more than 14% this week as senior officials from the US and Iran signalled that they were open to a diplomatic solution to the conflict. The war has disrupted global energy supplies for the past eight months, creating uncertainty in oil markets.
However, some market experts believe the latest fall in oil prices may be too sharp. “The selloff could be getting a bit overdone,” Rebecca Babin, senior energy trader at CIBC, said.
Babin said oil markets were reacting quickly to the unexpected election results, with investors selling first and assessing the situation later. She described the market's reaction as a “shoot first, ask questions” approach, saying emotions were running high after the election results.
Babin said many observers had expected a major Democratic victory to push Trump towards taking stronger military action against Iran.
However, Vance's comments and the lack of public support from some important US allies have challenged that expectation, she said.
Risk of military escalation remains
Despite the sharp fall in oil prices, experts have warned that the risk of military action in the Middle East has not disappeared.
Bob McNally, president of Rapidan Energy and a former adviser to President George W. Bush said the chances still favour military escalation in the region. McNally said Iran remained firm in its position and was unlikely to change its approach to the conflict easily.
“Iran is hardened in its uncompromising position,” McNally said. He also said Trump was unlikely to abandon his goal of preventing Iran from developing nuclear weapons, especially after paying a major political price for pursuing it, according to CNBC.
McNally warned that Trump may not be willing to walk away from the issue because preventing Iran from obtaining a nuclear weapon has become an important part of his political legacy.