Oil Prices Set for 12% Weekly Decline Amid Midterm Election Impact and Ongoing Strait of Hormuz Attacks
Brent and WTI crude are on track for a 12% weekly drop as market optimism grows after the U.S. midterms, while recent tanker incidents in the Strait of Hormuz keep a price floor in place.
Crude oil prices are poised for a sharp weekly decline, with Brent crude around $99.42 a barrel and West Texas Intermediate near $91.24, after falling about 12% since Monday. The slide follows the U.S. midterm elections, which have raised expectations that the conflict in the Middle East could be resolved more quickly.
Despite the downward pressure, prices remain supported by reports of fresh tanker attacks in the Strait of Hormuz. Reuters documented at least five vessel incidents in the Persian Gulf since Sunday, noting that threats to commercial traffic persist even as crude shipments through the strait recover.
"In the absence of escalation, the oil market is likely to continue to slowly give back the risk premium it built in recent months, with oil flows from the Persian Gulf holding up well," ING commodity analysts wrote in a note on Thursday.
Analysts caution that any escalation could halt the price decline.
"Until there is a credible path to safer, cheaper transit through the Gulf, oil is likely to remain supported on dips and prone to sharp moves on any escalation headlines," KCM Trade chief analyst Tim Waterer told Reuters.
FXPro senior market analyst Alex Kuptsikevich added that the Republican loss in the elections does not guarantee a de-escalation, citing the 2006 shift to Democratic control of Congress that did not prevent heightened U.S. activity in the Middle East during the Iraq war.
The market’s trajectory will depend on whether diplomatic efforts can reduce the risk premium and secure stable transit through the Gulf.