Oil Posts Worst Weekly Drop Since COVID as US Midterm Defeat Fans Iran War De-escalation Bets

Oil prices are on track for their biggest weekly decline since the COVID-era collapse after the Republican Party's heavy losses in the US midterm elections ignited market expectations that the US-Israeli war on Iran could wind down. Crude fell roughly 8% on the day following the midterms alone, with prices dropping below $90 a barrel by Thursday, compared with a high of $118 a barrel as recently as Friday. The sell-off has extended into a fourth consecutive day as of Thursday, marking the steepest sustained decline in energy markets since 2020.

The political catalyst sharpened when Vice President JD Vance publicly stated that the Iran war was the reason Republicans suffered such steep losses, adding pressure on the administration to reconsider its posture. Traders interpreted the Democratic sweep as reducing the risk of further military escalation against Iran and began pricing in a potential settlement. Asia fuel oil benchmarks joined the broader rout, slumping alongside crude as the de-escalation narrative took hold across energy markets.

The drop is also reshaping sentiment in emerging markets. Falling crude prices and hopes of easing West Asia tensions have improved the outlook for Indian equities, with foreign portfolio investors beginning to return to Dalal Street. Analysts caution, however, that a resilient global AI investment cycle could limit the scale of foreign fund inflows into markets like India even as the energy risk premium fades.