Brent fell 8.7% on Wednesday to $94.62, giving back roughly half of its climb from $70.14 to $117.45. The move suggests markets are removing part of the premium for full-scale confrontation with Iran, not pricing a settlement. The $88.21–93.80 support zone is the first major test.
Brent futures plunged 8.7% on Wednesday, settling at $94.62, while WTI dropped 8.3% to $88.12. The selloff extended into Thursday. The decline followed the Democratic sweep of Congress, although part of it began before the election results became clear.
The drop erased roughly half of the advance from $70.14 to $117.45, according to ActionForex. That does not mean the market is pricing a diplomatic settlement or a complete normalization of Middle Eastern oil supplies.
Political shift pulls Brent away from $120
The most immediate catalyst was the changing political landscape in Washington. The Democratic sweep has raised questions about President Donald Trump's ability and willingness to pursue further military escalation against Iran.
However, analysts remain divided over whether the selloff has gone too far. CIBC's Rebecca Babin questioned the speed of the decline, while Rapidan Energy's Bob McNally still sees substantial risks of further escalation.
Eurasia Group's estimated probability of renewed US strikes declined only modestly from 65% to 60%. Its probability for a negotiated agreement fell from 20% to 10%, and the probability of a prolonged standoff rose from 15% to 30%.
Supply estimates point in opposite directions
The physical market complicates the picture. Analysts cited by Reuters say crude shipments through the Strait of Hormuz have recovered close to pre-war levels, but those flows still face higher transportation costs. Analysts also warned that oil inventories in major consuming economies were near their lowest levels in 15 years.
JPMorgan estimates the oil market returned to a surplus of approximately 1.1 million barrels per day in September, widening to 1.4 million in October. The International Energy Agency's October assessment, as reported by Oil & Gas Journal, instead estimated a global deficit of approximately 790,000 barrels per day in September.
Brent tests the $88.21–93.80 support zone
ActionForex's technical view centers on a key Fibonacci retracement support zone between 88.21 and 93.80, the 61.8% and 50% retracements of the rise from 70.14 to 117.45. Thursday's intraday low near 93.44 was followed by a recovery toward $95.
Near-term risk remains on the downside unless Brent achieves a sustained break above the daily 55 EMA, currently around 101.92. The daily MACD has turned negative following bearish divergence from the earlier highs. RSI has fallen toward 35.
A decisive break below 88.21 would indicate that Brent is reversing the entire advance from 70.14, and would bring 84.56 support into immediate focus.
Source: ActionForex
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