Oil Plunges About 8% as Brent Sinks Below $100 on Bets the Iran War Could End: What It Means for Energy Stocks and Gas Prices

A third straight drop has taken a big bite out of the war premium in crude. Supply data still points the other way, so the move may not be a one-way street.

Why did oil prices fall so much on Nov. 4?

Oil fell because traders bet the midterm results could push Washington toward ending the Iran war. Brent, the global benchmark, settled near $95 a barrel on Wednesday, Nov. 4, down about 8%, and U.S. crude settled around $88, as Democrats won Congress and top Republicans blamed the conflict.

Trading Economics put Brent's fall at more than 8% for the day, its third straight loss. West Texas Intermediate, the U.S. benchmark, also fell about 8%. Brent settled at $103.60 on Tuesday, so it lost roughly $8.60 a barrel in one session. During the session, Brent traded as low as about $93.91 and WTI about $87.59, Bitcoin Magazine reported, citing CNBC. Reuters, via BusinessDay, said Brent touched its lowest level since Sept. 4 during the session.

The slide has been fast. Brent fell 7.6% on Monday, its biggest one-day drop since late July, and had last traded under $100 on Oct. 7, with no settlement below that level since Sept. 22, Invezz reported. Yahoo Finance noted that WTI, which closed at $104 last Friday, was on pace for its worst week since April 2020. We covered the start of this move in Monday's oil story.

How did the election move crude?

The link runs through politics. Vice President JD Vance wrote on social media that "the reason we lost is the war," The Private Banker reported. President Trump pointed to fuel costs on Fox News, saying, "I think it's the gasoline price."

Traders took that as a sign the White House may want a deal sooner. Dennis Kissler of BOK Financial said Democratic control of Congress "could also tighten US military spending in the Middle East," according to Reuters. Andy Lipow of Lipow Oil Associates said Democrats may try to restrict war funding, The Private Banker reported. Oilprice.com, citing RTE, reported that a senior Iranian official said Tehran could reopen the Strait of Hormuz within two days if the U.S. meets its demands, including lifting oil sanctions.

Does the supply data support the drop?

Not cleanly, and that is the main reason for caution. U.S. crude stockpiles fell by 865,000 barrels to 409.8 million in the week ended Oct. 30, according to government data reported by Reuters, when analysts in its poll had expected a rise of 877,000 barrels. Trading Economics said it was the fifth straight weekly decline.

Gulf oil exports also remain below normal. They fell to 17.1 million barrels a day in October from 18.9 million in September, about three-quarters of prewar levels, Reuters reported, citing Vortexa. On the other side, JPMorgan estimated a global surplus of 1.4 million barrels a day in October, Oilprice.com said. That split helps explain why forecasts differ so much. Goldman Sachs still saw Brent at $105 by December, Invezz reported.

Risks remain. Iran's Revolutionary Guard claimed four tankers were destroyed by mines south of Hormuz, a claim Oilprice.com described as unconfirmed. "I'm more concerned that we can see an escalation in Iran sooner than a resolution," Carl Larry of Enverus told Reuters. Michelle Brouhard of Kpler noted that the new Congress isn't seated until Jan. 3, TradingKey reported, which leaves the administration nearly two months to act.

What this means for your wallet

Energy investors felt it first. Energy stocks had the steepest losses of any group on Wednesday, TheStreet reported, and the Energy Select Sector SPDR fund (XLE) was down more than 5% during the session, with refiners hit hardest, Yahoo Finance said. Exxon Mobil (XOM) was down about 4.5% in a Trading Economics snapshot. A hypothetical $5,000 position in a fund that fell 5% would have lost $250 on paper.

That followed a strong run. Brent was still up about 49% from a year earlier, by Trading Economics' count, and Exxon and Chevron just posted big earnings beats. Those results came with fuel prices high, so a lasting drop could change the story for energy shareholders. The wider market rose anyway, and cheaper oil can help consumers and ease inflation pressure.

For drivers, some simple math helps. A barrel holds 42 gallons, so an $8.60 drop works out to about 20 cents a gallon, if refiners and retailers passed along all of it. A driver who buys 15 gallons a week would save about $3 a week. In practice, pump prices often lag crude and depend on refining and local taxes.

The national average was $4.12 a gallon on Wednesday, up $1.14 since the war began in February, ABC News reported, citing AAA. GasBuddy's Patrick De Haan said it could slip below $4 in the coming days, according to The Private Banker. Our earlier story on Brent topping $110 shows how quickly these moves can reverse.

What should investors watch next?

Three things stand out: any concrete step in U.S.-Iran talks, tanker traffic through the Strait of Hormuz, and next week's government inventory report. Traders will also watch for any sign of escalation. Trump told the Financial Times that Washington has no immediate plans to strike Iran, Oilprice.com reported, but that kind of stance can change quickly.