Oil Prices Surge After Midterm Elections Amidst Lingering Iran Conflict Uncertainty

Oil prices experienced a rebound on Thursday, recovering from a significant two-month low. This recovery comes as investors continue to assess the geopolitical landscape shaped by the Iran conflict and the recent US midterm election results, which saw Democrats secure victories.

Brent crude, the global oil benchmark, saw a notable increase of 2.47 per cent, trading at $96.96 a barrel by 7:11 pm UAE time, after an earlier gain of over 3 per cent. West Texas Intermediate (WTI), the US crude benchmark, also rose by 2.02 per cent to $89.90 per barrel. Both benchmarks had previously fallen to their lowest points in two months on Wednesday, with Brent briefly touching $93. Despite the recent uptick, both have now reduced their weekly losses to approximately 14 per cent.

The shift in power in the US, with the Democratic Party gaining control of both the House of Representatives and the Senate, introduces uncertainty regarding President Donald Trump's agenda concerning the Iran war.

Ole Hansen, head of commodity strategy at Denmark's Saxo Bank, noted in a report that while the post-midterm decline in crude prices offered some respite from sustained high energy costs, the absence of a peace agreement between Washington and Tehran leaves the market susceptible to significant geopolitical risks. He further cautioned that this situation could lead to renewed price volatility, especially as the recovery in Middle Eastern crude exports has not been matched by a corresponding improvement in refined fuel supplies.

Tensions in the Middle East remain elevated. On Thursday, Iran's navy reported that an oil tanker east of the Strait of Hormuz had struck a mine and caught fire, accusing the vessel of violating regulations by operating in an unsafe zone. Concurrently, Saudi Arabia continues to be a target of missile attacks from Yemen's Houthi rebels.

In diplomatic efforts, Iranian Foreign Minister Abbas Araghchi engaged in separate phone conversations with his Saudi and Qatari counterparts, Prince Faisal bin Farhan and Sheikh Mohammed bin Abdulrahman, respectively. These discussions focused on regional developments and current diplomatic initiatives aimed at fostering stability, according to the Tasnim news agency.

Paul Donovan, chief economist at UBS Global Wealth Management, shared his perspective with The National, suggesting that oil prices are likely to decrease further once the current conflicts subside. He projected that a fundamental fair value for oil would likely settle around $80 to $85 a barrel in a postwar environment.