Oil Prices Plunge 8% on Hopes of US-Iran Peace Deal

Global crude oil prices plunged on Wednesday and Thursday, hitting their lowest levels in more than two months as investors reacted to growing expectations of an end to the conflict involving the United States and Iran.

Brent crude, the international benchmark, fell by $8.98, or 8.7 per cent, to settle at $94.62 per barrel, while United States West Texas Intermediate (WTI) declined by $7.96, or 8.3 per cent, to $88.12 per barrel.

The decline followed the outcome of the United States midterm elections, in which President Donald Trump’s Republican Party suffered significant losses, raising expectations that political pressure could push his administration towards negotiations to end the war.

According to Reuters, investors believe the election outcome could constrain Trump’s military options and increase the likelihood of diplomatic efforts to resolve the conflict.

Trump reportedly acknowledged that the war contributed to his party’s electoral setback, while indicating that the United States had no immediate plans to launch fresh strikes against Iran.

The development weakened the geopolitical risk premium that had supported oil prices amid fears of supply disruptions from the Middle East.

Another factor contributing to the decline was the gradual recovery of crude shipments through the Strait of Hormuz, a strategic waterway responsible for transporting a substantial proportion of global oil supplies.

Gulf oil exports reportedly recovered to 17.1 million barrels per day in October, approximately three-quarters of pre-war levels.

JPMorgan estimated that the global oil market returned to a surplus of 1.1 million barrels per day in September, widening to 1.4 million barrels per day in October, as supplies recovered.

The sharp decline represented one of the biggest three-day losses in crude prices in more than six years, highlighting how quickly geopolitical developments can influence energy markets.

However, the downward movement proved temporary, as prices recovered on Thursday following fresh security incidents involving vessels in the Gulf.

Brent rose 2.43 per cent to $96.92 per barrel, while WTI gained 2.44 per cent to $90.27.