Brent crude extended its decline on Wednesday, touching $94 per barrel, the lowest level since September, as market participants digested the implications of the U.S. midterm elections. The global benchmark has now fallen roughly 20% from its 2023 peak, with traders focusing on President Donald Trump's next move regarding the ongoing conflict with Iran.
The president has repeatedly stated that the Iran war would conclude after the midterms. With the elections now behind him, Trump finds himself entangled in an unpopular conflict with few viable paths forward. Each potential course of action carries significant political and economic risks.
Trump's constrained options on Iran
One possibility is negotiating a deal with Tehran. However, Iranian officials have already dismissed concessions, and they have observed Trump's electoral setbacks, which may embolden them to adopt a harder stance in any talks.
Another option involves launching military strikes to pressure Iran into negotiations. Yet, previous strikes, including those in the early weeks of the conflict, failed to yield a diplomatic breakthrough. Iran has also threatened to retaliate against Gulf nations, including Israel, if attacked.
Alternatively, Trump could capitulate to Iranian demands and revert to the Memorandum of Understanding (MoU). According to political scientist John Mearsheimer, the MoU was effectively a "surrender document," and embracing it would alienate the neoconservative supporters who remain loyal to the president.
Maintaining the status quo—intensifying economic sanctions and preserving the naval blockade—also poses challenges. Attacks on shipping continue, the blockade is costly, and Democrats may cut funding when the new Congress convenes.
Given Trump's perceived weakness, Iran might launch preemptive strikes against U.S. forces or allies, which could trigger a renewed escalation and drive oil prices higher.
Technical outlook for Brent
From a technical perspective, Brent has been in a steep downtrend. After peaking at $117 in October, the price has plummeted to the current $94 level, now sitting at the 50% Fibonacci retracement of the recent rally.
The commodity has broken below the $100 Major S/R pivot point on the Murrey Math Lines, and both the Relative Strength Index (RSI) and MACD indicators continue to point lower. Additionally, price action remains below the Supertrend indicator, reinforcing bearish momentum.
Should the sell-off persist, the next target is the 61.8% Fibonacci retracement at $88. A move back above the $100 resistance level would invalidate the current bearish outlook.
This article is for informational purposes only and does not constitute financial advice.
