Oil prices fell sharply on Wednesday after Democrats won the US midterm elections, raising pressure on President Trump to end the war in Iran. Brent settled 8.7% lower and WTI 8.3% lower. Bond yields fell as energy prices dropped.
Brent crude settled 8.7% lower at $94.62 a barrel on Wednesday, its lowest level in two months, after the Democrats' landslide victory in the US midterm elections. Traders and analysts said a rush of optimism over an end to the conflict drove the move.
West Texas Intermediate, the US benchmark, settled down 8.3% at about $88.12 a barrel, leaving it down almost 15% this week. Brent has fallen more than 19% since the end of last week on reports of progress towards a peace agreement between Washington and Tehran.
MarketWatch said the drop put oil on track for its largest one-week decline since 2020, as investors weigh whether a Democratic sweep could lead to a quicker end to the war.
Vance blames the war for the Republican defeat
US vice-president JD Vance blamed the conflict for the Republicans' wipeout in Tuesday's vote. He said pollsters found the top response from Republican voters who backed Democrats was a demand to end the war.
Meanwhile, Senate Democratic leader Chuck Schumer said his new majority would work with Republicans to end the war. CBS reported that Trump had asked advisers whether he should fire defence secretary Pete Hegseth, a champion of the Iran war.
Analysts see a higher political cost for the war
Claudio Galimberti, chief economist at Rystad Energy, said the election result makes pursuing the war more costly for the Trump administration. Joel Hancock, a senior commodities analyst at Natixis Bank, said that "All of Trump's recent statements on Iran have been quite conciliatory".
Hancock added that without a peace deal, Brent was likely to move back above $100 a barrel because of high logistical costs and the continued difficulty of shipping crude out of the Gulf.
Bond markets rally as oil slumps
The slump in oil triggered a sweeping rally in government bond markets, which have been hit hard by energy-driven inflation in recent months. Ten-year gilt yields dropped 0.13 percentage points to 5.16%, the biggest daily drop since May.
Sources: Financial Times, MarketWatch (snippet-based)
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