Oil prices rebound as Iran war uncertainty weighs on markets

Oil prices rebound as Iran war uncertainty weighs on markets

Oil prices edged higher on Wednesday after a volatile trading session, as investors monitored developments in the US-Iran conflict and awaited Washington’s next move following the US midterm elections.

Brent crude futures climbed 82 cents, or 0.8%, to $104.42 per barrel, while US West Texas Intermediate (WTI) crude rose 50 cents, or 0.5%, to $96.59, recovering from earlier losses.

In the previous session, Brent settled at its lowest level in nearly four weeks as traders assessed prospects for diplomatic efforts to end the wars in Ukraine and Iran.

The US midterm elections added another layer of uncertainty, with Democrats securing majorities in both chambers of Congress, limiting President Donald Trump’s Republican control for the remainder of his second term.

Priyanka Sachdeva, head of market insights at Phillip Nova, said Trump’s mixed signals, with military strikes continuing alongside statements suggesting no further escalation, had made it difficult for traders to predict the market’s direction.

She noted that investors had reasons to book profits and reduce speculative positions following October’s sharp rally. However, she warned that supply disruption risks around the Strait of Hormuz remained unresolved.

Sachdeva also pointed to an unexpected decline in US crude inventories as a factor supporting prices.

A US official said Washington had carried out what it described as defensive strikes on Iran’s Qeshm Island on Tuesday, targeting surface-to-air missile systems allegedly used against American assets. Another official described the operation as limited and said it did not indicate a return to large-scale military action.

Meanwhile, markets continued to monitor diplomatic efforts to end the US-Israeli war with Iran. Qatar intensified its mediation efforts to prevent further escalation, although a senior Iranian official told Reuters that Tehran and Washington remained far from reaching an agreement.

On the supply front, US crude inventories dropped by 5.27 million barrels during the week ended October 30, according to American Petroleum Institute data cited by market sources on Wednesday.

The decline contrasted with expectations of an increase of around 880,000 barrels among eight analysts surveyed by Reuters.

Gasoline inventories increased by 1.43 million barrels, while distillate stocks, including diesel, declined by 1.19 million barrels.

Haitong Futures said in a Wednesday note that falling diesel inventories and the larger-than-expected increase in gasoline stocks presented a mixed but broadly supportive picture for oil prices.