Oil Traders Brace for Iran Risk After U.S. Midterms
Oil traders are weighing the risk of renewed U.S. strikes on Iran after the November 3 midterm elections, according to ING strategists. They say prices could…
Oil traders brace Iran escalation after the U.S. midterm elections on November 3, with ING strategists warning prices could fall if hostilities do not resume. The market is waiting to see whether President Trump follows through on hints that the United States could restart attacks on Iran.
The outcome matters for oil prices because traders have factored in the possibility of renewed conflict. ING commodity strategists Warren Patterson and Ewa Manthey said an agreement between Washington and Tehran would not necessarily be needed for prices to retreat.
“If we get past the elections without renewed strikes on Iran, that might be enough for the market's risk premium to start eroding,” the analysts wrote.
Oil market weighs conflict risk against flows
The strategists’ assessment, reported by OilPrice.com, is conditional: escalation is not certain, and a pause in fighting after the elections could remove some of the risk premium embedded in prices. That premium reflects traders’ concern that conflict could disrupt oil supplies.
But oil-flow reports have not produced a lasting change in market sentiment. Reports that shipments through the Strait of Hormuz had returned to, and at times exceeded, pre-war levels initially weighed on prices. Their effect later faded as other reports described Iranian attacks on tankers.
Those attacks reached an all-time high this month, according to the OilPrice.com report. They also show why the recovery in flows has not ended concern about the Persian Gulf: shipments may be moving, but the security situation remains unsettled.
For consumers and businesses, the distinction matters because oil prices respond not only to the amount of crude moving through the region, but also to the risk that those flows could be interrupted. A decline in the risk premium could ease pressure on prices; renewed attacks could keep supply concerns in view. The ING note does not present either outcome as settled.
Diesel prices move lower
Crude has taken a wait-and-see position, while diesel prices have fallen following reports that Russian diesel is heading to the United States. ING’s analysts said the agreed volumes are too small to change the market balance, yet a benchmark measure of diesel refining margins has still dropped.
The ICE gasoil crack spread fell to $70 per barrel, its lowest level since early October, according to the strategists. It also moved down from record highs reached last month amid global supply disruption.
That split points to different pressures across energy markets. Crude traders are focused on whether conflict resumes after the vote, while diesel pricing has responded to reports of incoming Russian supply even as analysts question whether those volumes can materially shift the balance.
The next immediate marker for the market is the U.S. midterm election on November 3. ING’s strategists said that if renewed strikes do not follow, the risk premium could begin to erode.
Source: oilprice.com
