Brent crude rises to $104 as Iran war uncertainty supports oil prices

Oil prices advanced on Wednesday, 4 November, as traders assessed the outlook for the US-Israeli war with Iran following Democratic gains in the US midterm elections. Continued uncertainty over diplomatic negotiations and concerns about potential supply disruptions through the Strait of Hormuz supported crude prices.

Brent crude futures increased by 76 cents, or 0.7%, to $104.36 a barrel, while US West Texas Intermediate (WTI) crude gained 63 cents, or 0.7%, to $96.72 a barrel at 0730 GMT.

Both benchmarks reversed earlier losses during a volatile trading session, reflecting changing market expectations about the conflict and its potential implications for global energy supplies.

The latest movement followed a previous session in which Brent settled at its lowest level in nearly four weeks as investors assessed diplomatic efforts to end the conflicts in Iran and Ukraine.

Brent crude rises above $104 as geopolitical uncertainty supports prices

The oil market has remained sensitive to developments in the Middle East, particularly the possibility of further military escalation involving the United States and Iran.

Democrats secured majorities in both chambers of the US Congress in the midterm elections, changing the political balance for the remainder of President Donald Trump’s second term.

Investors are assessing how the election outcome could influence Washington’s approach to the conflict and ongoing diplomatic efforts.

However, uncertainty over US policy has complicated market expectations.

Priyanka Sachdeva, head of market insights at Phillip Nova, said conflicting signals from the Trump administration, including continued military operations alongside statements indicating limited appetite for further escalation, had made it difficult for traders to establish a clear market direction.

She also highlighted the possibility of profit-taking and reductions in speculative positions following the sharp rally in October.

The combination of geopolitical uncertainty and changing trading positions has contributed to volatility in crude futures.

Strait of Hormuz remains a major oil supply concern

The Strait of Hormuz remains a central factor in the market’s assessment of Middle East supply risks.

The waterway connects the Persian Gulf with the Gulf of Oman and the Arabian Sea, making it an important route for international crude oil and petroleum product shipments.

Any disruption to tanker movements through the strait could affect exports from major Gulf producers and increase transportation and insurance costs.

Sachdeva said the underlying supply disruption risks had not disappeared despite expectations of diplomatic progress.

This has limited the extent to which traders have been willing to price out geopolitical risk from the market.

For oil producers, refiners, shipping operators and energy traders, developments around the waterway remain important indicators of potential supply constraints.

US strikes on Iran add to uncertainty over military escalation

Developments involving US military operations have also influenced market sentiment.

A US official said Washington had carried out what it described as defensive strikes on Iran’s Qeshm island, targeting surface-to-air missile systems used against US assets.

Another US official characterised the operations as limited and said they did not indicate a return to major combat operations.

The distinction between limited military action and a broader escalation remains important for oil markets because of the potential consequences for regional infrastructure, shipping routes and crude exports.

Meanwhile, Qatar has increased its mediation efforts to prevent further escalation following the US elections.

However, a senior Iranian official told Reuters on Tuesday that Iran and the United States remained far from reaching an agreement to end the war.

The absence of a confirmed diplomatic breakthrough continues to leave the market exposed to changes in geopolitical developments.

US crude inventory drawdown provides additional market support

Alongside geopolitical developments, US petroleum inventory data has provided another source of support for crude prices.

Market sources cited by Reuters reported that US crude inventories declined by 5.27 million barrels in the week ended 30 October, according to American Petroleum Institute (API) data.

This contrasted with expectations among analysts surveyed by Reuters, who had anticipated an increase of approximately 880,000 barrels.

The API figures also showed gasoline inventories increasing by 1.43 million barrels, while distillate stocks declined by 1.19 million barrels.

The inventory decline offered additional support to crude prices by indicating a tighter US crude stock position than market participants had expected.

However, the API figures are industry estimates. The official US Energy Information Administration (EIA) inventory report was scheduled for release later on Wednesday, at 1530 GMT.

The EIA figures will provide a further reference point for traders assessing US petroleum supply conditions.

Oil market outlook depends on Iran negotiations and supply conditions

The immediate direction of crude prices will depend on developments in the US-Israeli conflict with Iran, diplomatic efforts and the condition of global oil supply routes.

Any progress towards an agreement could reduce concerns about potential disruptions and influence geopolitical risk premiums in crude prices.

Conversely, further military escalation or restrictions affecting shipping through the Strait of Hormuz could intensify supply concerns.

US inventory figures will also remain important in determining how geopolitical developments interact with underlying petroleum market conditions.

For oil producers, refiners, airlines, shipping companies and industrial energy consumers, continued volatility creates uncertainty around procurement costs, fuel expenses and supply planning.

The latest price increase demonstrates that geopolitical risks remain an important influence on the oil market, even as traders assess the possibility of diplomatic progress.

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