Oil Volatility to Surge Ahead of Midterm Elections; Brent May Hit $120

Oil Prices Set for Increased Volatility as Midterm Elections Approach

Rising geopolitical tensions and soaring freight costs are pushing oil prices higher, with Brent crude potentially testing $120 per barrel ahead of the US midterm elections.

Soaring Freight Costs Impacting Oil Prices

The ongoing conflict in Ukraine has significantly disrupted global shipping, leading to unprecedented freight rates. As of now, the cost of transporting oil has surged to levels not seen in decades. For instance, while Brent crude was trading at approximately $62 per barrel in January 2026, current rates have skyrocketed to around $130 per barrel. The average daily freight rate for Very Large Crude Carriers (VLCCs) has ballooned to an astonishing $1.3 million, translating to nearly $35 per barrel in freight costs alone, which now constitutes about 25% of the delivered cost of crude oil.

This steep increase in freight costs has eroded the arbitrage opportunity for Indian refiners, particularly as the landed cost of West Texas Intermediate (WTI) crude approaches $150 per barrel. With Indian oil marketing companies facing daily losses due to these inflated transport costs, many are turning to Middle Eastern crude, despite the discounts available from West Africa.

Geopolitical Tensions and Their Impact on Oil Prices

Recent events in the Middle East have further exacerbated the situation. Crude prices surged following drone and missile attacks by Iran-backed Houthi rebels against Saudi Arabia, raising concerns over a potential wider conflict that could involve the US. Additionally, threats to shipping in the Strait of Hormuz have intensified, with Iran warning that it will pursue vessels using unauthorized routes, heightening the risks for oil transport in the region.

Despite these challenges, there is a glimmer of hope for easing prices, as Russia has indicated it may partially lift its diesel export ban, allowing 500,000 metric tons to enter international markets. However, analysts caution that this volume is significantly lower than the 50 million barrels needed to stabilize prices in OECD Europe.

Market Outlook Ahead of US Midterm Elections

As the US midterm elections approach on November 3rd, oil market volatility is expected to rise. Analysts at Mirae Asset predict that Brent futures could test the $120 per barrel mark in the near term, driven by the combination of geopolitical tensions and supply constraints. With crude oil flows already under pressure, any further disruptions could lead to accelerated withdrawals from reserves, which were running at approximately 1.5 million barrels per day by the end of September.

Key Highlights

• Brent crude prices are currently around $130 per barrel, with potential to reach $120 ahead of the midterms.
• Freight costs have surged to nearly $35 per barrel, significantly impacting global oil pricing.
• Geopolitical tensions in the Middle East are contributing to rising oil prices and increased market volatility.
• Russian diesel exports may partially resume, but volumes are insufficient to ease price pressures significantly.
• Indian refiners are facing losses due to high transport costs, leading to a shift towards Middle Eastern crude.

Investor Note: As geopolitical tensions and freight costs continue to impact oil prices, investors should closely monitor developments in the Middle East and the implications for global supply chains, particularly as the US midterm elections draw near.