Despite the Democratic Party's strong showing in the U.S. midterm elections, analysts warn that the risk of renewed conflict with Iran remains high. Crude oil prices have dropped over 16% in the past five trading days, partly due to Vice President JD Vance's remarks blaming the Republicans' loss on the ongoing war. The Democrats plan to push for a war powers resolution when they take control in January, but tensions in the Middle East show no signs of easing.
Recent attacks on oil tankers near Oman and continued missile strikes by Iran's Houthi allies in Yemen have heightened concerns. The U.S. military has deployed a third carrier strike group to the region, and the consulting firm Rapidan Energy estimates an 80% chance of renewed fighting as diplomatic efforts stall. President Donald Trump has hinted at further military action, stating, "I would rather not destroy the rest of the country if possible but maybe I'll have to."
Brent crude was trading above $97 on Friday, while U.S. crude hovered around $90. Analysts predict prices could surge past $100 a barrel if hostilities resume. Bob McNally of Rapidan Energy noted that President Trump is determined to prevent Iran from obtaining nuclear weapons, a goal that Tehran appears unwilling to accept. The escalation dynamic persists as long as this fundamental disagreement remains.
Tehran has been provocative since the election, with Iran's Supreme Leader Mojtaba Khamenei claiming the U.S.'s "collapse has accelerated." Congress is unlikely to pass a war powers resolution until January, and even then, Trump could veto it. The main leverage Democrats will have is control over government funding, which expires on Dec. 11. Helima Croft of RBC Capital Markets suggested that deferring funding decisions could reshape the administration's longer-term outlook.