A Sharp Reversal for Oil After Months of Wartime Highs

For most of this year, oil has been priced like a commodity at war. That changed quickly. Over the last seven trading sessions, West Texas Intermediate (WTI), the main U.S. benchmark, has fallen from $104.96 to roughly $87.50 a barrel, a drop of about 17%. Brent crude, the international benchmark, has slipped from $119.20 to around $96.50 over nine sessions, a decline of about 19%. Moves that large usually come from a recession scare or a global health crisis. This one came largely from politics.

While the war in Iran has influenced oil prices since the early part of the year, the biggest single blow to that war premium came from the recent U.S. midterm elections. Democrats won control of both the House and the Senate, and many observers read the outcome as a public rebuke of the decision to go to war. On November 4th, the day after the vote, Brent fell 8.7% to $94.62 and WTI fell 8.3% to $88.12, both at their lowest levels since August 31st. Oil futures ended the week down about 13%, the largest weekly loss since 2022.

The reasoning behind the selloff is fairly simple. Higher energy costs have fed inflation, and voters noticed. Traders now expect the White House to seek a quicker exit from the conflict. President Trump has acknowledged the war contributed to his party’s losses, and he said it was “highly unlikely” he would order further strikes if talks on Iran’s nuclear program and the reopening of Hormuz make real progress. That comment helped push prices lower again today. 

Diplomacy is adding to the mood. Qatar’s emir spoke with President Trump about efforts to calm tensions in the region, and reports suggested Washington and Tehran were edging closer to a breakthrough. Iran has also reportedly shown some flexibility on nuclear issues it previously refused to discuss. 

Physical supply is improving too. Tanker traffic through Hormuz has picked up, and Saudi Arabia and the United Arab Emirates are bringing crude shipments back toward prewar levels. In several markets, physical cargoes are now selling at a discount, a sign that buyers have options again. Saudi Arabia has even cut prices for Asian customers to a six-year low, which suggests producers are once again competing for market share rather than rationing barrels. A stronger dollar and a selloff in technology stocks added more pressure, as investors pulled back from riskier assets. 

For drivers, relief is starting to appear at the pump. The national average price of gasoline stood at $4.06 a gallon on Friday, and Tom Kloza of Gulf Oil expects it to fall below $4 within about ten days. 

None of this means the war premium has disappeared. Iran still wants the U.S. naval blockade lifted, sanctions eased, and frozen assets released before it fully reopens the strait. Talks have stalled repeatedly since a ceasefire collapsed in June, and analyst Rebecca Babin noted there has been “little concrete evidence of meaningful diplomatic progress.” Military risk also remains. U.S. forces recently carried out limited strikes near the strait, and Israeli Prime Minister Benjamin Netanyahu has been pressing for new strikes now that the midterms are over.

Even after this slide, Brent remains more than 50% above where it stood a year ago. Prices swung within a $19 range over a single week. The market has priced in a good chance of peace, but not certainty. If talks produce a signed agreement and Hormuz reopens fully, prices could have further to fall. If negotiations break down or fighting resumes, much of the recent decline could reverse just as quickly.