The Week in Oil: Crude Stays Elevated Ahead of U.S. Midterms

By Giulia Petroni

Here's a look at what happened in oil markets in the week of Oct. 26-30 and what the focus will be in the days to come.

OVERVIEW: Oil prices remain elevated as fears of renewed escalation in the Middle East following the U.S. midterm elections and persistent threats to shipping in the Strait of Hormuz sustain a significant geopolitical risk premium. The most active Brent crude contract, for January delivery, traded above $113 a barrel on Friday, while West Texas Intermediate futures hovered around $104. Both benchmarks are on track to record weekly gains.

MACRO: The macroeconomic outlook remains increasingly challenging, as elevated energy prices threaten to reignite inflationary pressures and complicate the outlook for monetary policy. Higher oil prices are likely to feed through into fuel, transport and production costs, potentially keeping headline inflation elevated and prolonging the squeeze on consumers and businesses.

Against this backdrop, the Federal Reserve left the door open to further interest-rate hikes should inflation prove persistent. The latest U.S. data showed a monthly increase in the Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, reinforcing concerns that price pressures remain sticky. Markets see a 74% probability of a December rate hike, according to the CME's FedWatch tool.

GEOPOLITICAL RISKS: Oil prices have continued to climb even as Persian Gulf exports have at times surpassed prewar levels, suggesting that improving supply has been outweighed by mounting security concerns.

A growing number of attacks on commercial vessels has heightened fears of further disruption to shipping routes. On Friday, the United Kingdom Maritime Trade Operations said a tanker passing through the Strait of Hormuz had been targeted by a small boat carrying two explosive devices. The incident followed unverified claims by Yemen's Houthi militants on Thursday that they had struck several targets in Saudi Arabia, including the Ras Tanura and Rabigh refineries and a Saudi Aramco production facility in Abqaiq.

Meanwhile, diplomatic efforts to revive peace negotiations between Washington and Tehran show no signs of a breakthrough.

U.S. Vice President JD Vance sent a message to Mohsen Rezaei, secretary of Iran's Supreme National Security Council, in an effort to restart peace talks. But the risk of renewed military action remains. President Trump told several Gulf Arab allies to prepare for a possible short but intensive military campaign against Iran following next week's midterm elections, The Wall Street Journal reported.

SUPPLY AND DEMAND: Oil flows through the Strait of Hormuz remain significantly disrupted, averaging just 49% of prewar levels, equivalent to 8.46 million barrels per day, the latest Kpler data showed. However, alternative export routes via Fujairah and Oman are helping to mitigate the shortfall, with loadings running 36% above prewar levels.

Meanwhile, U.S. crude oil inventories fell by 1.9 million barrels last week, according to the Energy Information Administration. Gasoline stocks increased by 3.9 million barrels, while distillate inventories--including diesel and heating oil--declined by 1.5 million barrels.

The decline in crude inventories was driven by lower net imports, reflecting higher exports, while refinery processing remained constrained. Despite the increase in gasoline stocks, U.S. gasoline demand fell to its lowest level since February during the reporting week.

WHAT'S AHEAD: Members of the Organization of the Petroleum Exporting Countries and their allies meet virtually on Sunday to review their production policy for December. They are expected to hold current production levels steady.

However, the main focus for commodity markets will be the upcoming U.S. midterm elections, their potential implications for energy policy and geopolitics, and what follows, with traders fearing renewed attacks on Iran.

On the economic front, next week's U.S. calendar is headlined by JOLTS job openings data on Tuesday and ADP private-sector employment figures on Wednesday. Markets will also monitor weekly jobless claims and the University of Michigan's preliminary consumer sentiment survey.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

October 30, 2026 07:48 ET (11:48 GMT)