Oil Falls Amid Hopes for Resolution to Middle East Conflict

By Sherry Qin

Oil extended declines in Asia on Thursday after the Democrats' big wins at the U.S. midterm elections raised market expectations for a resolution to the conflict in the Middle East.

"The Democratic sweep of both the House and Senate at the U.S. midterm election represents a meaningful shift in the political landscape and has triggered an unwind of part of the political and geopolitical risk premium embedded in markets," said MUFG's Lloyd Chan.

Crude futures responded decisively overnight, with both Brent and West Texas Intermediate futures slumping more than 8% on Wednesday.

President Trump acknowledged in an interview with The Wall Street Journal that the Iran war had contributed to Republican losses, but said he didn't regret the conflict.

Vice President JD Vance blamed the war for Republican losses in the midterms. "The reason we lost is the war. The president himself said so last night," Vance said in a post on X. "Any honest conversation about where we go from here must start there."

Front-month WTI crude-oil futures fell 0.4% to $87.77 a barrel in Asian trading, while front-month Brent was 0.2% lower at $94.64 a barrel.

Still, ANZ analysts think the market reaction is unwarranted as there remain risks of escalation in the Middle East following the elections. Meanwhile, "there appears no end in sight to Iran's control of the Strait of Hormuz, which has constrained oil flow," they added.

Asian energy and oil shipping stocks fell sharply Thursday after oil prices slid overnight.

PetroChina and Sinopec fell 5.5% and 2.0%, respectively, in Hong Kong. Cosco Shipping Energy Transportation gave up 4.95% in Shanghai while Mitsui O.S.K. Lines fell 7.9% in Tokyo.

The broader picture for Asian equities was mixed as investors weighed the prospects of future AI regulation following the election. The Democratic sweep had triggered a massive divergence in the tech sector on Wall Street overnight, with hyperscaler stocks surging while semiconductor and artificial-intelligence infrastructure stocks fell.

The immediate risk to the AI boom probably comes at the state level, where governors and legislatures can impose new restrictions on construction relatively quickly, which would have a direct impact on the pace of the AI infrastructure build-out and the companies benefiting from the boom, said Jonas Goltermann, chief markets economist at Capital Economics.

Asian chip stocks tracked declines by U.S. peers in early Thursday trading. South Korea's SK Hynix and Samsung Electronics fell 6.95% and 4.8%, respectively. In Japan, Kioxia Holdings was down 7.5%.

The index heavyweights sent most Asian markets lower. South Korea's Kospi was 3.5% lower and Taiwan's Taiex dropped 0.85%. Japan's Nikkei Stock Average declined 1.1%. Hong Kong's Hang Seng Index rose 1.6%.

Substantially lower oil prices have also boosted investor appetite for precious metals. Nonyielding gold benefited from tempered inflation pressures and easing expectations for aggressive monetary tightening by the Federal Reserve.

Spot gold was last up 1.5% at $4,120.22 a troy ounce.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

November 04, 2026 21:19 ET (02:19 GMT)