Brent crude futures slipped 50 cents to $94.12 per barrel on Thursday, while West Texas Intermediate (WTI) dropped 61 cents to $87.51. The retreat kept both benchmarks well below the $100 mark they breached in late September. This decline extended the damage from Wednesday’s session, when panic selling drove a double-digit percentage drop. Investors are pricing in a fundamental shift in US foreign policy leverage following the November elections.
The trigger was electoral, not geopolitical. Republicans lost control of Congress, handing Democrats the House and Senate. Two sources close to Gulf government circles told Reuters that this shift weakens President Donald Trump’s hand. He now faces a hostile legislature if he attempts to escalate military action against Iran. The political cost of the previous week’s conflict became undeniable after Trump admitted to the Financial Times that the war contributed to his party’s defeat. Vice President JD Vance went further, publicly questioning the decision to enter the conflict and blaming it for the electoral setback.
Tehran is unimpressed by Washington’s internal turmoil. Supreme Leader Ayatollah Mojtaba Khamenei issued a statement asserting that American hostility remains a constant regardless of which party holds power. Yet, the market’s reaction suggests traders believe the US is more likely to seek a settlement than a total war. The risk is that a deal framing Iran as the victor could embolden further aggression rather than ensuring peace. Gulf analysts warn that a Trump administration appearing defeated might act recklessly to salvage face.
Diplomatic wires are heating up in Doha. Qatar is stepping up mediation efforts as the US navigates its new political constraints. Simultaneously, the United Arab Emirates is accelerating plans for a third oil pipeline to reduce dependence on the Strait of Hormuz, the chokepoint most vulnerable to Iranian retaliation. On the supply side, the Energy Information Administration reported US crude inventories dropped by 865,000 barrels last week, defying analyst expectations of an 877,000-barrel build. This inventory draw provides a slight buffer against the price crash, but it is insufficient to offset the macro-political fear gripping the market.