Oil Prices Rebound Sharply After Brutal Midweek Rout

Oil prices surged Thursday, recovering some of Wednesday's staggering losses as traders reconsidered whether the U.S. midterm election results would actually bring a swift end to the Iran war.

Brent crude had climbed to $98.01 per barrel by early afternoon, gaining $3.39, or 3.58%, while West Texas Intermediate rose $2.21, or 2.51%, to $90.33. Both benchmarks continued climbing later in the session.

The rebound followed Wednesday's extraordinary selloff, when Brent plunged $8.98, or 8.7%, to settle at $94.62. WTI shed $7.97, or 8.3%, closing at $88.12. Both benchmarks recorded their lowest settlements since August 31.

The catalyst was the Democratic sweep of both chambers of Congress in Tuesday's midterm elections, which prompted speculation that President Donald Trump would face greater pressure to end the eight-month conflict with Iran.

That speculation helped drive Brent down roughly 18% this week, with traders aggressively shedding positions as expectations for an eventual diplomatic settlement increased.

But by Thursday, the prospects for a quick resolution appeared considerably less certain.

Eurasia Group lowered its estimated probability of a negotiated agreement to just 10%, down from 20%, while putting the likelihood of renewed U.S. strikes at 60%.

Meanwhile, shipping risks haven't disappeared. Reuters reported at least five vessel incidents in the Persian Gulf since Sunday with threats to commercial traffic persisting despite a recovery in crude shipments through the Strait of Hormuz.