Brent plunged almost 9% in one session after the White House tied its election defeat to the Iran war. Traders are now pricing in a quicker end to the conflict, although the Strait of Hormuz is still largely closed.
Oil prices had their sharpest fall in months on Wednesday. Brent crude for January delivery fell 8.7% to settle at $94.62 a barrel, according to Bloomberg, and US crude (WTI) fell 8.3% to $88.12.
At one point during the session, Brent was down about 10% and touched its lowest level since 4 September. It fell below $100 a barrel for the first time since early October. Losses continued in Asian trade on Thursday, with Brent at $93.63 around mid-morning in Beijing, down another 1%.
The scale of the move is striking. Brent traded near $118 last Friday. At about $94, it is roughly a fifth lower in less than a week.
What changed
Three developments drove the fall.
The first was the election. Democrats won both the House and Senate, which gives them significant power to check the administration’s military plans through funding, hearings and war powers resolutions.
The second, and the trigger for the steepest decline, was the White House response. Vice President JD Vance directly attributed Republican losses to the Iran war, and reports said President Trump acknowledged the war played a role. Traders read that as a signal that the administration now has a political reason to end the conflict. An energy analyst at ICIS was reported as saying a deal now looks more likely than not, given the election result and Iran’s economic situation.
The third was diplomacy. Qatar has stepped up its mediation, and Qatari officials said both the US and Iran were reviewing new proposals from mediators.
Technical factors also amplified the move. When prices fall quickly, traders who bet on higher prices are forced to sell, which pushes prices down further.
What the market is pricing
The oil market is now pricing in a settlement that has not happened. The underlying situation in the Gulf has not changed yet.
The Strait of Hormuz remains largely closed to commercial shipping. A senior Iranian official said this week that Iran and the US are still far from a deal. Reports said tankers caught fire near the strait, and President Trump warned of a “heavy hit” if Iran does not cooperate, suggesting the threat of further military action has not gone away.
That creates a risk of a sharp reversal. If talks stall or new incidents occur in the Gulf, oil could rise quickly again. Brent has moved between roughly $70 and $120 a barrel since just before the war began, and its swings have been very large.
Refined fuels remain tight. Diesel prices are still at record highs in some markets, because Gulf refinery exports cannot move freely. Heating oil futures fell about 7% on Wednesday, but supply problems persist.
India gets a reprieve
For India, which imports about 85% of its crude, a fall of this size is significant. Every $10 drop in oil reduces India’s annual import bill by an estimated $12–15 billion, improves the current account and supports the rupee.
It also eases inflation pressure. The RBI raised rates in October partly because of high fuel costs. Brent near $94, together with easing cost pressures in services shown in this week’s PMI survey, could allow the RBI to keep rates unchanged in December.
For Indian companies, the effects are mixed. Oil marketing companies, paint makers, airlines, tyre makers and consumer goods companies benefit from lower crude. Oil producers such as ONGC and refiners that earned unusually high margins during the crisis will see those gains shrink.
About The Author
