Global oil prices fell for a fourth consecutive day on Thursday, reaching their lowest levels in more than two months as investors increasingly anticipated a possible diplomatic resolution to the US-Israeli war with Iran.
Brent crude futures declined by 0.85 per cent to $93.82 per barrel, while US West Texas Intermediate (WTI) crude fell 1.36 per cent to $86.92, extending a sharp sell-off triggered by the United States midterm elections.
Both benchmarks had plunged more than eight per cent on Wednesday, settling at their lowest levels since August 31, as markets reacted to major electoral losses suffered by President Donald Trump’s Republican Party.
ELECTION RESULTS RAISE DIPLOMATIC EXPECTATIONS
The election outcome has strengthened expectations that Trump could face increased political pressure to reconsider his military strategy against Iran and pursue negotiations to end the conflict.
Investors believe Democrats’ gains in Congress could complicate the president’s ability to sustain military operations, potentially increasing incentives for a diplomatic settlement.
The decline in oil prices also reflects hopes that an agreement could restore disrupted energy supplies from the Middle East, particularly shipments through the strategically important Strait of Hormuz.
ANALYSTS WARN AGAINST PREMATURE OPTIMISM
Market analysts have cautioned that the recent decline in oil prices does not necessarily signal an imminent end to the conflict, warning that uncertainty surrounding diplomatic negotiations could trigger further volatility.
June Goh, senior oil analyst at Sparta Commodities, said investors were reassessing the implications of the US midterm elections for Trump’s handling of the war.
“Markets are assessing the impact of the midterm elections on Donald Trump’s next steps with the Iran war, pricing in more likelihood for the war to end,” Goh said.
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She, however, warned that significant uncertainties remained, particularly regarding the prospects for a comprehensive diplomatic settlement and the limited availability of strategic reserves.
“However, there will be more volatility ahead as the path to full diplomacy to end the war is still wrought with many unknowns while the global strategic reserves have drawn very thin,” she added.
Her remarks underscore the fragile nature of current market optimism, with traders remaining sensitive to possible military escalation, diplomatic setbacks and disruptions to energy infrastructure.
QATAR INTENSIFIES DIPLOMATIC EFFORTS
Meanwhile, Qatar has intensified diplomatic efforts aimed at preventing further escalation and encouraging negotiations between Washington and Tehran.
However, Iranian officials have indicated that the two sides remain far apart on the conditions required to end the war.
Despite the recent decline, analysts warn that oil prices could rebound sharply if diplomatic efforts collapse or military operations intensify.
GLOBAL ECONOMIC IMPLICATIONS
The conflict has significantly disrupted global energy markets, contributing to higher fuel costs, inflationary pressures and uncertainty for energy-importing economies.
For countries heavily dependent on imported petroleum products, including several African economies, sustained reductions in international crude prices could provide some relief from rising energy costs.
Nevertheless, market participants are expected to continue monitoring developments in Washington, Tehran and the Gulf region for indications of whether the latest price decline represents the beginning of a sustained recovery in energy supply or merely a temporary reaction to political developments.
