Oil prices rose on Wednesday as investors assessed the impact of the U.S. midterm elections on existing tensions in the Middle East. With the Democrats winning control of both houses of Congress, power shifted from Republicans to Democrats, which could affect government policies.
Increase in Oil Prices
As of 01:57 Eastern Time (06:57 GMT), January futures for Brent crude rose by 0.6% to $104.20 per barrel. WTI futures also increased by 0.5% to $96.59 per barrel.
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Political and Military Consequences
The recent elections dealt a blow to the Trump administration and may complicate its political agenda. Investors remain focused on whether Washington will take further military action against Iran or seek a diplomatic solution. Trump's mixed signals have increased uncertainty in the market.
Recently, the United States conducted defensive strikes against Iranian air defense facilities on Qeshm Island, near the Strait of Hormuz. Trump later stated that Washington had no plans for further attacks. Meanwhile, Tehran and Washington are considering new proposals from mediators to resolve their differences and avoid a return to full-scale war.
However, Iran has stated that the U.S. response to its conditions for reopening the Strait of Hormuz has been unsatisfactory. Qatar has also increased its mediation efforts, and both sides continue to exchange proposals, but a senior Iranian official told reporters that the two countries have not yet come close to an agreement.
The Strait of Hormuz, as a strategic waterway, raises significant concerns for oil markets, as disruptions in transportation could limit global oil supply. Recently, another tanker was attacked in the Strait of Hormuz, raising concerns about energy transport security in the region.
Before the elections, expectations of military action again after the elections had contributed to rising oil prices, but diplomatic signals caused rapid changes in this trend.
Available data from U.S. oil reserves have also provided some support for oil prices. The American Petroleum Institute (API) reported that U.S. crude oil inventories fell by 5.267 million barrels in the week ending October 30, while an increase of 2.1 million barrels was expected.
Gasoline inventories increased by 1.427 million barrels, while light distillate inventories decreased by 270,000 barrels.
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