Crude Oil: Prices Drop Below $90 After Election Loss

Vice President JD Vance directly linked the Republican Party's midterm losses to the ongoing war with Iran, a comment that immediately knocked crude oil prices below the $90 mark per barrel on Wednesday.

U.S. West Texas Intermediate crude finished the trading day at $88.12 per barrel, marking an 8.3% decline. Brent crude, the global benchmark, fell 8.7% to settle at $94.62. This drop contributed to a weekly slump of more than 14% for crude futures, the steepest weekly decline fueled by growing optimism for a diplomatic resolution.

The market reaction followed Tuesday's election results, where Democrats secured control of both the House and the Senate. Vance stated in a social media post, "The reason we lost is the war," and added, "The president himself said so last night." This public admission from a top GOP figure shifted trader sentiment, suggesting the White House may now prioritize ending the conflict that has driven domestic gasoline and diesel prices higher for eight months.

Andy Lipow, president of Lipow Oil Associates, noted that the election outcome leads markets to believe President Donald Trump is more inclined to strike a deal. Lipow pointed out that Democrats could restrict war funding and that Trump's earlier announcement regarding reduced aid to Israel might pressure Jerusalem to align with Washington's decisions. Trump told the Financial Times on Tuesday that he has no immediate plans to strike Iran, a stance that helped counter the initial market fear of escalation.

Rebecca Babin, a senior energy trader at CIBC, cautioned that the sell-off might be excessive. She described the market as reacting emotionally to the unexpected election result, noting that many observers had predicted a Democratic sweep would push Trump to escalate rather than negotiate. Babin argued that Vance's comments and the lack of support from key allies challenged that assumption.

Bob McNally, president of Rapidan Energy and a former advisor to President George W. Bush, warned that the odds still favor military escalation. He stated that Iran remains hardened in its uncompromising position. McNally added that Trump, having paid a high price to prevent Iran from obtaining a nuclear weapon, is unlikely to abandon that legacy goal and walk away from the conflict.