The Trump effect on oil prices: Fuel pressure rises ahead of November midterm elections

As the agreement between the US and Iran has ended, tensions in the Middle East are rising again, and the geopolitical risk premium in oil markets has increased. However, the rise seen in Brent crude in recent weeks has remained more limited compared to the sharp rally during the early stages of the conflict.

The barrel price of Brent crude increased by approximately 43 percent in the first three weeks after the war began on February 28, rising to as high as 119.5 dollars during that period. Following US President Donald Trump's announcement that the agreement had ended and the resumption of clashes on the US-Iran front, the rise since July 8 has remained at around 24 percent.

Prices increased by approximately 14 percent in the week of July 20, reaching as high as 102 dollars on Thursday. However, Brent crude, which fell by approximately 4 percent on Friday compared to the previous close, dropped back below 97 dollars. This picture showed that the market continues to price in the tension but is not reacting as sharply as it did in the previous period.

HIGH INVENTORIES LIMIT THE RALLY

According to experts, the fact that there has not been a loss of physical supply at the expected level, that global inventories remain high, and that the volume of oil at sea has increased are effective in keeping the price increase limited. Kpler Senior Oil Analyst Homayoun Falakshahi stated that the rise in oil prices is largely due to the geopolitical risk premium.

Falakshahi said that after the reopening of the Strait of Hormuz in June, the volume of oil at sea reached a record level of 1.35 billion barrels, and that China's high crude oil inventories also provide flexibility to the market in the short term.

According to Falakshahi, although Trump's direct impact on global oil prices is limited, his statements and social media posts can steer market expectations in the short term.

Trump's announcement that he will run for office again in 2028 has increased the political importance of the midterm elections to be held in November. While the economy, inflation, and fuel prices are among the critical topics for voter behavior in the US, it is assessed that the Washington administration may try to limit developments that could push gasoline prices higher.

Vienna Energy Research Institute President Fereydoun Barkeshli stated that the oil market has entered a highly speculative period, expressing that investors are pricing in the possibility of normalization rather than a long-term supply disruption. Barkeshli said that markets are reacting more weakly to developments in the Middle East compared to the early stages of the war.

Aaron Kildow, manager responsible for the crude oil market at the Swiss-based data provider Sparta, emphasized that the tools the Trump administration can use to lower fuel prices before the midterm elections are limited. According to Kildow, although imposing a temporary restriction on the export of refined petroleum products is a theoretical option, this step could have serious consequences, including for the fuel supply of allied countries.

Kildow stated that the most effective way to permanently lower oil prices is for the conflicts in the Middle East to end and for shipments to return to normal. He noted that crude oil production in the US is increasing, but this production cannot fully replace the medium-density crude oil provided from the Persian Gulf.