Brent Crude Holds Premium as Markets Await Iran Policy

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Brent Futures Supported by Geopolitical Risk Premium

Brent crude prices remain firmly elevated, hovering around $114 per barrel, according to ING analysts Warren Patterson and Ewa Manthey. They note that the market is holding a significant risk premium as participants await more visibility on President Trump’s approach to Iran after the U.S. midterm elections.

In their latest commentary, the analysts highlight that the recent upward move in oil prices reflects expectations of a higher probability of renewed tensions. At the same time, they caution that the absence of fresh military action against Iran following the vote could be sufficient to trigger an unwind of that premium.

Market Reaction Ahead of U.S. Midterm Elections

Recent price action has seen oil ease modestly, with benchmarks settling lower for a second straight session. Despite this pullback, Brent continues to trade near $114/bbl, underscoring the extent to which geopolitical uncertainty is still embedded in valuations.

The analysts write: “Oil prices edged lower yesterday, settling down for a second consecutive day. With Brent still trading around $114/bbl, oil prices remain elevated as the market waits for greater clarity on President Trump’s next move toward Iran. The broader move higher in recent weeks suggests the market is pricing in a greater likelihood of re-escalation.”

They add that visibility on policy direction is unlikely to improve before the upcoming U.S. vote: “We’ll likely have to wait until after the 3 November US midterms for more clarity on how the situation in the Middle East evolves. An agreement between the US and Iran may not be needed for prices to pull back. If we get past the elections without renewed strikes on Iran, that might be enough for the market’s risk premium to start eroding.”

Middle Distillate Complex Softens as Russian Flows Resume

While crude benchmarks remain supported, the middle distillate segment is showing signs of weakness. ING points to a notable decline in the ICE gasoil crack, which is now trading toward $70/bbl, its lowest level since early October.

The analysts state: “The middle distillate market is weakening, with the ICE gasoil crack trading down toward $70/bbl, its lowest level since early October. Diesel markets have eased after Russia lifted its diesel export ban earlier in the month, following a deal with Trump to supply more diesel to global markets. Russia is a major diesel exporter. These flows have come under pressure this year due to Ukrainian attacks on Russian refineries, which ultimately led Russia to impose a diesel export ban.”

U.S. Inventory Data Show Crude Draw, Product Builds

On the fundamentals side, the latest weekly figures from the American Petroleum Institute indicate a draw in U.S. crude stocks alongside builds in refined product inventories.

ING summarizes the numbers as follows: “The latest API data shows US crude oil inventories fell by about 2m barrels last week. Meanwhile, gasoline and distillate fuel oil inventories rose by 2.3m barrels and 420k barrels, respectively. The more widely followed EIA weekly report will be released later today.”

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