Crude oil prices continued their downward trajectory on Thursday, following a significant 9% drop in the prior session, as markets evaluated the ramifications of the Democrats’ decisive win over Republicans in the US midterm elections. The political setback heightened expectations that increasing pressure on the Republican Party might compel the Trump administration to pursue a negotiated settlement to end the war with Iran. In an extensive commentary subsequent to the electoral setback, Vise President JD Vance recognised that voter discontent regarding the conflict and the US-Israel alliance played a significant role in the Republicans’ lacklustre results. Senate Minority Leader Chuck Schumer, a Democrat, has also committed to concluding the war in the near future. Brent crude was trading at $93.51 a barrel, reflecting a decline of over 1%, or $1.05 in absolute terms. US West Texas Intermediate crude slipped 1.35% to below $87 a barrel. In the previous session, Brent futures settled at $94.62 a barrel, reflecting a decline of $8.98, or 8.7%. Meanwhile, WTI crude futures decreased by $7.97, or 8.3%, to reach $88.12. Both benchmarks concluded Wednesday at their nadir since August 31.
US President Donald Trump now confronts a decision between seeking a negotiated withdrawal from the conflict and the potential for increased escalation. With Democrats gaining control of both the House of Representatives and the Senate, a weakened Trump administration may encounter heightened limitations on its military options, thereby amplifying the motivation to pursue a negotiated settlement, as reported. The sources indicated that a comprehensive military action against Iran seemed increasingly improbable. However, Gulf analysts cautioned that a settlement allowing Iran to claim a clear victory while leaving Trump politically weakened could trigger further recklessness rather than bring restraint. Trump informed that the United States currently has no immediate intentions to engage in military action against Iran. On Wednesday, he recognised that the war had played a significant role in his party’s substantial loss in the midterm elections, resulting in Democrats gaining control of both chambers of Congress. Meanwhile, Iran’s Supreme Leader Ayatollah Mojtaba Khamenei stated in a written statement that US hostility toward Iran would persist regardless of which political party was in power in Washington.
Yemen’s Houthis asserted that they have aimed at King Khalid International Airport in Riyadh; however, Saudi authorities have not validated this claim. Qatar has escalated its mediation initiatives to avert further intensification of hostilities in the aftermath of the US elections. However, a senior Iranian official informed Reuters on Tuesday that Tehran and Washington are still significantly distant from achieving an agreement to conclude the war. Separately, the United Arab Emirates is contemplating the construction of a third oil pipeline aimed at facilitating the transport of crude oil beyond the Strait of Hormuz, as reported. The proposed pipeline is integral to the nation’s strategy aimed at markedly diminishing its reliance on the critical waterway. Goldman Sachs has elevated its projections for oil prices, attributing this adjustment to increasing risks associated with global supply chains. The investment bank cautioned that Brent crude may escalate to $140 a barrel by 2027, contingent upon oil production in the Gulf region remaining significantly below its average for 2025. The bank has revised its December Brent crude forecast upward to $105 a barrel, a notable increase from the previous estimate of $90.
Its price projection for US WTI crude was also revised upwards to $94 a barrel from $81. In an optimistic scenario, Brent crude may reach $140 per barrel and maintain an average of approximately $130 in 2027, contingent upon Gulf oil production being 3.5 million barrels per day lower than its 2025 average, as reported. Goldman Sachs anticipates that the market will incorporate an increased geopolitical risk premium, indicative of potential interruptions to oil supplies from the Middle East, the historical length of significant supply disruptions, and the apprehension that achieving a sustainable diplomatic resolution may be challenging. Meanwhile, the ambiguity surrounding the trajectory of the conflict persists, further complicating the forecast for oil prices. JPMorgan analysts indicated that evaluating the progression of the war continues to present significant challenges. At the outset of the conflict, the bank had anticipated that the US administration would refrain from surpassing specific economic thresholds. However, seven months into the war, several of those limits had been breached, with no clear strategy in place to bring the conflict to an end.
