Oil Price Shows War Escalation Risks; U.S. Midterm Eyed, Goldman Says — OPIS

Crude oil futures are currently pricing in a "significant probability" of escalation or a longer Middle East conflict, Goldman analysts said Tuesday.

Meanwhile, the upcoming U.S. midterm federal elections should not have large impacts on the energy and artificial intelligence sectors, they said.

In a webinar by the U.S. investment bank, Daan Struyven, Goldman's Co-Head of Global Commodities Research, said three data points in oil and natural gas futures suggested that the petroleum market is signaling a sizable chance of an escalated or prolonged Iran war.

According to Struyven, the current premium in Brent futures is at an elevated level of about $25/bbl, and the December 2027 Brent futures have risen 10% over the last month. In addition, the European natural gas markets are pricing in a roughly 50% chance that global LNG exports would not recover from their Iran war lows this winter, he said.

In the last 30 days, both Brent and WTI futures have rallied by as much as over 10% before retreating slightly. During that span, crude oil contracts also outperformed gasoline and diesel futures -- whose sharp gain in the last several months underscored an acute supply shortage in diesel fuel.

Crude oil option prices are "relatively affordable," Struyven said, however.

Meanwhile, Alec Phillips, chief U.S. political economist with the investment bank, said the predication markets are currently showing a 90% chance for the House of Representatives and a little over 60% chance for the Senate to both flip to Democrats' control after the U.S. midterm elections on Nov. 5.

The two chambers of the U.S. Congress have both been ruled by a Republican majority since January 2024.

However, it's maybe "far-fetched" for some analysts to expect Congress to regulate the AI industry following the midterm elections, Phillips said.

This is because Republican politicians -- who are relatively more supportive of the AI industry -- could block the Senate, which requires a 60-vote majority to advance a bill, and President Trump could also exercise his power to veto any such legislation, Phillips said.

The data centers that power AI use a large amount of electricity and can stretch thin the power grid. In June, Chevron and Microsoft signed a 20-year power supply agreement to develop a power facility in West Texas near Chevron's natural gas production.

On equities, Goldman analysts said while the broad-based S&P 500 index is only around 2% off its all-time high, the median of S&P 500 companies' stocks is about 15% below their record level.

This reflects the ongoing strength of AI-related companies, while high energy prices and elevated bond yields and interest rates are negatively pressuring other large U.S. companies, Goldman analysts said.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

Reporting by Frank Tang, frank.tang@dowjones.com; Editing by Michael Kelly, mkelly@opisnet.com

(END) Dow Jones Newswires

October 20, 2026 13:37 ET (17:37 GMT)