Morning Highlights: Eurasia Group Cuts Odds of an Iran Deal to 10% as Oil Steadies After an 8% Drop

Thursday, November 5, 2026 | 6:30 AM ET

Brent (January) $96.15 | WTI (December) $88.83

Brent +$1.53 (+1.6%), WTI +$0.71 (+0.8%). Both fell more than 8% on Wednesday and settled at their lowest since August 31. Two tankers and a tugboat caught fire in the Strait of Hormuz, per Iran’s IRGC. China’s commercial diesel stocks are at a record low.

Bottom Line

Oil is bouncing modestly after Wednesday’s drop as the market works out what the midterm result means for the Iran war. Democrats took control of Congress, and Reuters notes the war and the resulting fuel prices were major grievances for voters. UBS’s Giovanni Staunovo said the situation in the Middle East is still unresolved, which is why prices are recovering a little, and that Brent is more exposed to geopolitics while WTI is a domestic US benchmark. Sparta Commodities’ June Goh said markets are pricing in more likelihood of the war ending, but that more volatility is ahead because the path to full diplomacy has many unknowns and global strategic reserves have drawn very thin. Pricing a higher chance of an end to the war is not the same as a deal, and nothing in the copy shows Tehran moving toward Washington’s terms.

The scenario odds have shifted the wrong way for a deal. Eurasia Group cut its chance of renewed US strikes on Iran to 60% from 65%, but it also cut the probability of a deal to 10% from 20% and raised a continued standoff to 30% from 15%. It reasons that Iran has held firm on its demands and that Trump is unlikely to accept terms seen as a defeat. Eurasia says escalation would send Brent into a $110 to $125 band, a sharper rise than the recent drop. Citi flagged concern that with the elections over, the White House could use its executive powers in foreign policy to escalate with Iran. Analysts note the new Congress does not take office until January, so there is a window of uncertainty before then

Hormuz is the immediate risk. Iran’s IRGC said two oil tankers and a tugboat caught fire in separate incidents after trying unauthorized routes. One tanker hit a naval mine moving south of the Strait. Another caught fire on its way out in the eastern part of the Strait, and a tugboat that approached to help also caught fire, according to the IRGC. Separately, UKMTO said it received a report of a tanker struck by two unidentified projectiles 50 nautical miles north of Madinat ash Shamal, Qatar. Crew status, damage and environmental impact are unconfirmed. On Wednesday the IRGC said four tankers were destroyed by mines in an area south of the Strait that Iran has declared off limits. These are Iranian claims, and I’d treat them as unverified until UKMTO or shipping data confirm them. Oilprice notes flows have recovered substantially from the spring lows, but the security situation near the Strait has deteriorated, with more attacks on tankers in recent weeks and crude flows dipping from their highs.

The supply balance is moving the other way. JPMorgan said Wednesday that rising Gulf exports and weak demand have put the global oil market back into surplus. It estimates 1.1 million bpd in September and 1.4 million bpd in October, nearly matching last year’s average of 1.3 million bpd. The EIA reported that US crude, gasoline and distillate inventories all fell last week while demand hit its highest in a year.

The product side has a separate story in China. Chinese refiners have sold only around 500,000 metric tons of diesel for November loading so far, per traders and Reuters calculations from trade data, and preliminary estimates put the month’s total below 800,000 tons, the lowest since July. That follows exports of 1.33 million tons in August and 1.8 million tons in September after Beijing relaxed export controls in July, and the surge pulled domestic stocks down. Oilchem data show commercial diesel stocks at 11.1 million tons (83 million barrels) at the end of October, the lowest since the consultancy began records in 2011. Shandong diesel prices are at their highest in more than eight years. Traders say export cuts became necessary even with margins of up to 800 yuan ($120.30) a ton over the past week, because domestic stocks fell while demand held and refinery output came in below expectations. Refiners have been limiting sales to major end-users and dealers, a Guangdong dealer said some refiners bundled each ton of diesel with three tons of gasoline, and truck drivers in several provinces report stations rationing diesel. China had been expected to ramp up exports in the last two months of the year after issuing a fourth batch of quotas that lifted the annual allowance to 42 million tons, 6% above last year, but at least two cargoes are still scheduled to load after mid-November. Gasoline is softer, with November exports possibly under 1 million tons as Asian petrol margins fell nearly $20 since late October to under $7 a barrel, the lowest since February.