Oil prices rise as Iran conflict risks remain unresolved

Highlights

Brent rose 2.48%, while WTI gained 1.55%.
The U.S. midterm results raised uncertainty over Iran policy.
Gulf supply recovery has restored a global oil surplus.

Brent crude futures climbed 2.48% to $96.97 a barrel, while West Texas Intermediate futures gained 1.55% to $89.49, according to the latest market readings. The recovery followed a decline of more than 8% in both benchmarks on Wednesday, when prices reached their lowest closing levels since August 31. Uncertainty over the conflict continued to influence trading, Reuters reports.

U.S. election reshapes expectations for Iran conflict

The Democratic takeover of Congress has complicated expectations for U.S. policy toward Iran. Republicans suffered substantial losses in Tuesday's elections, with higher fuel costs and the prolonged conflict emerging as major concerns among voters. The new Congress will take office in January, leaving uncertainty over how the administration might respond before then.

Political risk assessments remain divided. Eurasia Group reduced its estimated probability of renewed U.S. strikes on Iran to 60% from 65%, while lowering the likelihood of a diplomatic agreement to 10% from 20%. Its estimate for a prolonged standoff increased to 30% from 15%, reflecting the difficulty of reaching a settlement.

Security concerns also remain around the Strait of Hormuz. Iranian authorities reported fires involving two oil tankers and a tugboat attempting to use unauthorized shipping routes. Although crude shipments through the waterway have recovered close to prewar levels, transportation costs remain elevated.

Returning Gulf supplies ease market pressure

The recovery in Middle Eastern oil exports has changed the global supply balance after months of disruption. JPMorgan estimates that the market returned to a surplus of 1.1 million barrels per day in September, expanding to 1.4 million barrels per day in October.

However, inventories remain unusually tight. Commercial oil stocks in major consuming economies are near their lowest levels in 15 years, leaving markets vulnerable to unexpected supply interruptions.

U.S. inventory figures provided additional support. Government data released Wednesday showed declines in crude oil, gasoline, and distillate stocks as petroleum demand reached its highest level in a year.

Supply risks keep oil prices volatile

The latest rebound highlights the tension between improving supply conditions and unresolved geopolitical risks. While renewed Gulf exports have eased shortages, another escalation could disrupt shipments and reverse recent price declines.

Eurasia Group estimates that a significant escalation could push Brent crude into a range of $110 to $125 a barrel. That would represent a substantial increase from Thursday's $96.97 level.

For consumers and businesses, further volatility could affect transportation costs, inflation, and expectations for interest rates. Oil markets remain sensitive to developments in Iran despite the return of a global supply surplus.

As we previously reported, gold rises above $4,100 as U.S. dollar weakens after midterms.

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