Oil prices fell for a fourth consecutive day on Thursday as investors assessed the possibility of reduced tensions in the US-Israeli war on Iran. Markets are increasingly hopeful that political pressure on US President Donald Trump could encourage his administration to seek a diplomatic solution instead of expanding military action.

Brent crude futures dropped by 80 cents, or 0.85%, to $93.82 per barrel. US West Texas Intermediate (WTI) crude fell by $1.20, or 1.36%, to $86.92 per barrel as of 0426 GMT.

Both major oil benchmarks had already suffered heavy losses in the previous trading session. They dropped by more than 8% and settled at their lowest levels since August 31.

US Election Results Influence Oil Market

The recent losses suffered by Trump’s Republican Party in congressional elections have raised expectations that the US administration may become more cautious about military action against Iran.

A Democratic-controlled Congress could place greater limits on the president’s military options once lawmakers take office in January. Sources close to Gulf government circles believe this political situation may increase Trump’s incentive to negotiate an agreement with Tehran.

A full-scale US assault on Iran is now considered less likely by some regional observers. However, the future direction of the conflict remains uncertain.

Oil analysts say a possible end to the war could help restore energy supplies from the Middle East. The conflict has disrupted oil shipments and increased uncertainty across global energy markets.

June Goh, a senior oil analyst at Sparta Commodities, said markets were considering how the election results could influence Trump’s next decisions. Investors are assigning a higher possibility to an end to the conflict, although the path towards diplomacy remains unclear.

Oil Supply Through Strait of Hormuz Recovers

Oil shipments through the Strait of Hormuz have recovered to levels close to those recorded before the war, according to analysts. However, transporting oil through the region is still more expensive.

The Strait of Hormuz is one of the world’s most important energy routes. A large share of oil exports from Gulf countries passes through this narrow waterway.

The recovery in shipments has helped return the global oil market to a supply surplus after months of disruption.

JPMorgan estimated that the market recorded a surplus of 1.1 million barrels per day in September. The surplus increased to 1.4 million barrels per day in October. This is close to last year’s average surplus of 1.3 million barrels per day.

Uncertainty Could Push Oil Prices Higher

Despite the recent decline, analysts warn that oil prices could rise sharply if tensions increase again.

Citi said the US administration could still use its executive powers in foreign policy now that the midterm elections are over. This has raised concerns about the possibility of further escalation with Iran.

Eurasia Group lowered its estimate of renewed US strikes on Iran from 65% to 60%. However, it also reduced the likelihood of a diplomatic agreement from 20% to 10%. The group increased the probability of a continued standoff from 15% to 30%.

It warned that another escalation could push Brent crude prices towards $110 to $125 per barrel.

Energy experts have also highlighted concerns about low commercial oil inventories. Stocks in major oil-consuming countries are close to their lowest levels in 15 years.

Meanwhile, US crude oil, gasoline and distillate inventories all declined last week, according to the Energy Information Administration. The agency also reported that US oil demand reached its highest level in a year.

These developments suggest that the global oil market remains vulnerable. Although prices have fallen for four straight days, renewed military tensions could quickly reverse the trend.

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