Oil slides as Republican midterm losses fuel hopes of Iran conflict exit

Crude prices dropped below the lower boundary of their recent trading band on Tuesday and continued falling after US Vice President Vance attributed the Republican Party's major midterm election losses to the ongoing war with Iran.

The decline began as soon as he shared his remarks on X, strengthening the view among traders that the Trump administration might pursue a way out of the conflict rather than intensify military action.

It is worth noting, however, that Trump retains the legal authority to sustain operations against Iran even if Democrats gain control of both chambers of Congress. Forcing him to exit the war is therefore not straightforward, particularly at a stage where he has little left to lose. Still, for now that is the scenario the market appears to be pricing in.

Going forward, attention stays on US-Iran talks. A diplomatic breakthrough would notably reinforce the bearish trend and quickly push oil prices back toward pre-conflict levels. Conversely, an escalation could revive a rally on a higher risk premium, though such a move might prove brief if Trump resorts to limited strikes designed to preserve credibility before withdrawing.

CRUDE OIL TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, crude oil (CFD contract) broke under the channel on Tuesday and continued its decline toward the 87.00 level before pausing. Buyers may step in around this area, with risk defined below 87.00, aiming for a rally to the 110.00 resistance. Sellers, meanwhile, are watching for a move lower to increase bearish positions toward the 68.00 support, with 80.00 as an initial target.

CRUDE OIL TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, a descending trendline marks the bearish momentum. If a pullback occurs, sellers are expected to use the trendline as resistance, with risk defined above it, targeting fresh lows. Buyers, in contrast, need a break above the trendline to build bullish bets toward the 110.00 resistance.

CRUDE OIL TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, a move above the 89.00 handle could strengthen the bullish momentum and extend the pullback toward the downward trendline. From a risk management standpoint, buyers have a favourable risk-to-reward setup around current levels to target new highs, while sellers require a pullback to the trendline for a better opportunity. The red lines indicate today's average daily range.

UPCOMING CATALYSTS

Wednesday brings the latest US Jobless Claims data. On Thursday, the week concludes with the US NFP report and the University of Michigan Consumer Sentiment survey. The primary focus remains on US-Iran negotiations.