Oil slumps after midterm election rebuke to Trump raises bets on Iran war exit

HOUSTON - Oil prices fell more than 8% to settle at their lowest in more than two months on Wednesday after President Donald Trump's Republican Party lost control of Congress in midterm elections, as investors bet that the shift in power could hasten the end of the US-Israeli war with Iran.

Brent futures LCOc1 settled $8.98, or 8.7% lower, at $94.62 a barrel, while US West Texas Intermediate crude futures CLc1 fell $7.97, or 8.3%, to $88.12. Both benchmarks closed at their lowest since August 31.

Trump now faces a choice between a negotiated exit and a riskier escalation. A weakened Trump, facing a Democratic Congress able to constrain his military options, has greater incentive to seek a deal, said two sources close to Gulf government circles. A full-scale assault on Iran now looks less likely, they said.

Yet an agreement that allows Iran to claim clear victory and leaves Trump looking defeated can provoke recklessness as readily as restraint, Gulf analysts said.

Trump told the Financial Times on Tuesday that the United States had no immediate plans to strike Iran, and on Wednesday acknowledged that the Iran war had played a role in his party's sweeping defeat in the midterm elections, as Democrats won control of the House of Representatives and the Senate.

"The Democratic control of Congress could also tighten US military spending in the Middle East and further heighten the possibility of a peace deal sooner than later," said Dennis Kissler, senior vice president of trading at US financial services firm BOK Financial. He said that larger crude oil exports out of the Middle East, and Trump's comments that he has no immediate plans to strike Iran, is adding to pressure on crude prices.

US Vice President JD Vance distanced himself from the decision to go to war on Wednesday, questioning its worth and blaming it entirely for a stinging electoral rebuke by voters that delivered control of Congress to Democrats.

Iran's Supreme Leader Ayatollah Mojtaba Khamenei said in a written statement that US hostility would persist regardless of which party was in power. Yemen's Houthis said they had targeted King Khalid International Airport in Riyadh. There was no confirmation from Saudi authorities.

Qatar seeks to avoid escalation

Qatar stepped up mediation efforts to avert a renewed escalation of attacks after the US elections. A senior Iranian official told Reuters on Tuesday that Iran and the United States remain far from a deal to end their war.

"The elections are giving bears a reason to cast doubt on a continuation in Iran ... I'm more concerned that we can see an escalation in Iran sooner than a resolution," said Carl Larry, who leads the trading and North America risk team at Enverus.

Gulf exports of crude, condensate and refined products, excluding liquefied petroleum gas, averaged 17.1 million barrels per day in October, according to ship tracking data from Vortexa, down from 18.9 million bpd in September but still roughly three-quarters of pre-war levels.

The United Arab Emirates is considering building a third oil pipeline that would deliver crude outside the Strait of Hormuz, Bloomberg reported, citing people familiar with the matter, as the country aims to sharply reduce its dependence on the waterway.

In the US, crude stocks, gasoline and distillate inventories fell last week, the Energy Information Administration said.

Crude inventories fell by 865,000 barrels to 409.8 million barrels in the week ended October 30, the EIA said, compared with analysts' expectations in a Reuters poll for an 877,000-barrel rise. — Reuters