Crude oil fell more than 16% in five trading days as investors hoped the Democratic midterm victory would end the Iran war. Analysts say tensions remain high, and Democrats have limited options until they take control of Congress in January.
Analysts say the U.S. and Iran are careening toward renewed war despite growing hopes this week that the Democrats' decisive midterm election victory will bring the conflict to an end.
Crude oil prices fell more than 16% over the last five trading days after Vice President JD Vance publicly blamed the Republicans' stinging loss on the war. Helima Croft, head of global commodity strategy at RBC Capital Markets, told investors she was struck by the divergence between deepening escalation concerns in the Gulf and the off-ramp optimism of market participants.
Attacks continue in the Gulf
Late Saturday, U.S. Central Command said it disabled a St. Kitts-flagged ship that ignored multiple warnings and tried to leave the region after visiting an Iranian port, according to media reports. CNBC couldn't independently confirm reports from Iranian state media of explosions on Qeshm Island and in the port of Jask.
Several oil tankers have also come under attack near Oman since the election, killing one seafarer, according to maritime security agencies. Meanwhile, a third carrier strike group is en route to the region, and the consulting group Rapidan Energy sees an 80% chance that fighting will resume as diplomacy stalls.
Trump told reporters Thursday that he will decide soon whether to attack Iran again. According to CNBC: "We're locked and loaded," the president said.
Oil could return above $100
Renewed fighting would push oil prices above $100 a barrel again, said Bob McNally, president of Rapidan. Brent crude traded above $97 on Friday, while U.S. crude was around $90.
Amos Hochstein, a former energy advisor to President Joe Biden, said gasoline, diesel and jet fuel prices would all surge if war resumes. He also said the risk remains alive, especially since Trump no longer faces future elections.
Congress holds limited leverage
Democrats plan to use their majorities in both chambers to pass a war powers resolution demanding that Trump end the war. However, Congress is unlikely to pass one until Democrats take control in January, and Trump can veto it anyway.
Croft said the main leverage is the power of the purse. Government funding expires on Dec. 11, and she said negotiations for another continuing resolution could drag into 2027. Deferring funding decisions would not immediately constrain Trump's ability to conduct military operations, she told investors.
An unnamed senior Iranian official told Reuters that Tehran sent a nuclear proposal to the U.S. through Qatar and will discuss it only after the U.S. meets its demands. Trump seemed to dismiss those efforts on Thursday.
Source: CNBC
Trading involves risk.
Risk Disclaimer
