Brent crude rises as Iran war uncertainty keeps oil market volatile

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Brent crude rises on war

Highlights

Brent crude rises $1.75, or 1.85%, to $96.37 a barrel as of 1145 GMT, rebounding from an over 8% drop on election-driven volatility.
Eurasia Group lowers chance of renewed U.S. strikes on Iran to 60% but raises standoff probability to 30%, warning Brent could surge to $110–$125 on escalation.
JPMorgan reports global oil market returned to a surplus of 1.1 million bpd in September and 1.4 million bpd in October, but inventories remain near 15-year lows.

Price rebound follows election-driven selloff

As reported by Pakistan Business Recorder, Brent crude futures rise on Thursday as traders weigh the future course of the U.S.-Israeli war with Iran after President Donald Trump’s Republican Party suffers heavy losses in this week’s midterm elections.

Brent is up $1.75, or 1.85%, at $96.37 a barrel as of 1145 GMT, while U.S. West Texas Intermediate crude gains 89 cents, or 1%, to $89.01. Both benchmarks had tumbled more than 8% in the previous session, settling at their lowest levels since August 31.

Giovanni Staunovo, commodity analyst at UBS, says the unresolved situation in the Middle East is supporting a modest recovery in prices. June Goh, senior oil analyst at Sparta Commodities, says markets are increasingly pricing in the possibility that the war could end, but adds that volatility is likely to persist because the route to full diplomacy remains highly uncertain.

Analysts say uncertainty is likely to continue before the new Democratic-controlled Congress takes office in January. Citi says in a note that, with the midterms over, there are concerns the White House could lean more heavily on executive powers in foreign policy and potentially escalate the conflict with Iran.

Supply risks and inventories keep market on edge

Eurasia Group lowers its estimate for the chance of renewed U.S. strikes on Iran to 60% from 65%, but also cuts the probability of a deal to 10% from 20% because Tehran holds firm on its demands and Trump is unlikely to accept terms seen as a defeat. The consultancy raises the likelihood of a continued standoff to 30% from 15% and says any escalation could push Brent sharply higher into a $110 to $125 a barrel range.

Separately, Iran’s Islamic Revolutionary Guard Corps says on Thursday that two oil tankers and a tugboat catch fire in separate incidents after attempting to use unauthorised routes through the Strait of Hormuz. Although analysts say crude shipments through the waterway have recovered to near pre-war levels, transport costs remain elevated.

JPMorgan says the return of Gulf supply has pushed the global oil market back into surplus after months of war-related disruption. The bank estimates the market returns to a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October, close to last year’s average of 1.3 million bpd.

Even so, commercial oil inventories in major consuming countries remain near their lowest in 15 years, while U.S. crude, gasoline and distillate stocks all fall last week as demand reaches its highest level in a year, according to the Energy Information Administration. Mukesh Sahdev, chief executive of energy consultancy XAnalysts, says Iran could also emerge from the U.S. election outcome with greater resolve, adding another layer of risk to the market.

In our earlier article on the surge in oil shipping costs, we examined how conflict-related risks are disrupting major tanker routes and turning freight into a much larger component of the delivered crude price. We also noted that attacks and rerouting around chokepoints such as the Strait of Hormuz and the Red Sea have pushed charter and insurance rates sharply higher, raising costs for importers and ultimately feeding into fuel and consumer prices.

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