Oil Just Had Its Worst Week Since the Pandemic. Brent Fell 16% While the Strait of Hormuz Is Still a War Zone. How Is That Possible?

On Friday night Brent crude, the benchmark used to price most of the world’s oil, settled at US$98.32 a barrel. A week earlier the front-month contract had closed at US$117.64. That is a fall of more than 16% in five trading days, Brent’s steepest weekly drop since the pandemic spring of 2020, and at about US$19 a barrel the biggest one-week fall in dollars in LSEG records going back to 1988.

Here is the strange part. The Strait of Hormuz, the narrow channel between Iran and Oman that normally carries about a fifth of the world’s oil, is still a war zone. Iran still restricts who may pass, the US Navy is blockading Iran’s ports, and on Thursday a seafarer was killed when an oil-products tanker exploded in the Gulf, in what its manager believes was a missile strike. Nobody has signed a peace deal.

So how can oil have its worst week in six years while its most important shipping lane is still being shot at? The short answer is that a price is a bet on the future, not a photograph of today, and three things changed the bet this week.

📌 Key points

• Brent fell more than 16% in the week to 6 November, from US$117.64 to US$98.32, its worst week since 2020. US crude (WTI) fell nearly 13% to US$90.83.
• The trigger was politics: Democrats won both houses of Congress on 3 November, and traders read that as pressure on Washington to end the war with Iran. Brent fell about 8.7% on Wednesday alone.
• Hormuz is dangerous but not closed to oil: about 11 million barrels a day of crude got through in October, and JPMorgan estimates the world now produces 1.4 million barrels a day more than it uses.
• Funds that had bet on higher prices were already heading for the exit, which made the fall violent.
• For Malaysians: BUDI95 stays at RM1.99, unsubsidised RON95 is down to RM4.27, the subsidy bill gets lighter and Petronas’s windfall smaller.

What happened this week

Oil was already slipping before the vote. Iran’s supreme leader had authorised talks with Washington, more crude was leaving the Gulf, and by Tuesday Brent had settled at its lowest in nearly four weeks.

Then the Democrats took the House and the Senate, and on Wednesday Brent dropped about 8.7% to US$94.62, its biggest one-day fall since April. Vice President JD Vance publicly blamed the war for the Republican losses, and President Donald Trump told Fox News: “I think it’s the gasoline price.” With American petrol 39% above its pre-war price, traders concluded that the war’s political cost had just gone up. On Thursday and Friday Brent clawed back about 4% as tankers were hit again, helped by a Reuters report that Iran had sent a new nuclear proposal to Washington through Qatar. Nothing was agreed.

How the week is measured	Then	Friday 6 Nov	Change
Brent front-month (December contract, expired 30 Oct)	US$117.64	US$98.32	−16.4% (−US$19.32)
Brent January contract only	US$113.43	US$98.32	−13.3%
WTI (US crude), same week	about US$104	US$90.83	about −12.7%
Brent’s 2026 closing high (29 April)	US$118.03	US$98.32	−16.7%
Brent before the war (week to 27 February)	US$72.48	US$98.32	+35.7%

Why do some websites say 13% and others 16% or 17%? Oil futures expire. December Brent stopped trading on 30 October at US$117.64 and charts switched to January, which closed that day at US$113.43. Old contract to new gives 16%; January to January gives 13%. Reuters and CNBC use the first, the “front-month” method. If you trade oil through a CFD, a contract that tracks the price without owning the oil, check when your broker rolls to the next month.

So is the Strait of Hormuz shut or not?

“Shut” has become a political word. Iran declared the strait closed in early March and still treats it as its own, letting through ships it approves and attacking others. The International Maritime Organization counted at least 30 vessels hit in October, double September’s 15.

But the oil is moving. According to the ship-tracking firm Kpler, crude flows through Hormuz fell nearly 90% in March, to 1.8 million barrels a day, then recovered to about 11.1 million a day in October, against roughly 16 million before the war. That is about 70% of normal, moving under US air cover and through ship-to-ship transfers, with freight costing about US$21 a barrel against US$6.50 in September. “On balance in terms of oil coming out, there hasn’t been a massive impact,” Braemar tanker analyst Mary Melton told CNBC.

That is the heart of the puzzle. In the spring the market was pricing a Gulf whose oil could not get out. Now it is pricing oil that gets out slowly, expensively and under fire. Those are very different prices.

Three reasons the fall was so big, so fast

1. The war premium shrank. A risk premium is the extra money built into a price for the chance that something goes badly wrong, here that Gulf supply is cut again. When the odds of a deal rise, the premium is the first thing to go, and the midterm result plus the Iranian proposal raised those odds in traders’ minds.

2. There is now too much oil. JPMorgan estimates the world produced 1.1 million barrels a day more than it used in September and 1.4 million in October. Part is supply: the Gulf’s recovery plus about 1.5 million barrels a day of extra output from Brazil, Venezuela, Guyana and Argentina. Part is “demand destruction”, meaning people and businesses using less because the price is too high, about 3.3 million barrels a day since the war began. “The crude market is loosening to a state of oversupply based on the balance,” said Rystad analyst Janiv Shah. The International Energy Agency disagrees, still projecting a shortfall to the end of 2026.

3. Crowded bets unwound. Money managers had piled into “long” positions, bets that oil would keep rising. Exchange data for the week to 3 November, before the results were known, show they cut their combined net long in Brent and WTI by 78,492 contracts to 272,075, the biggest cut since the summer. When a crowd heads for the same exit, selling triggers stop-loss orders and trend-following funds, and that selling triggers more.

Why oil could still turn back up

“The market is still looking for evidence of a firm deal being signed,” Shah said. Bob McNally of Rapidan Energy Group sees an 80% chance that fighting resumes, pushing both benchmarks back above US$100. Trump said on Thursday he would “rather not destroy the rest of the country if possible but maybe I’ll have to”. Kpler’s Matt Stanley put it simply: “Oil doesn’t have to be at $117 to be expensive.”

This year has already shown how fast a deal story can reverse. After the April ceasefire Brent fell 13% in a day to US$94.75; three weeks later it closed at US$118.03, its 2026 high. In late June it fell to US$73.74 with tankers moving; by late July it was back above US$100.

What it means for a Malaysian trader

• Your petrol. BUDI95 stays at RM1.99 a litre for eligible Malaysians, up to 300 litres a month. The unsubsidised prices moved: RON95 is RM4.27 for 5–11 November (down 15 sen), RON97 RM4.70 (down 20 sen), diesel RM5.12 (down 15 sen). Prices are announced on Wednesdays, so this week’s fall should feed into the 11 November announcement if oil stays lower.
• The subsidy bill. The gap the government covers on each subsidised litre of RON95 is now RM2.28, down from RM2.43 last week. Fuel subsidies are costing about RM40 billion this year against RM15 billion budgeted, and Budget 2027 expects about RM40 billion again next year. Cheaper oil makes that easier.
• Petronas and the budget. The flip side is income: a RM32 billion Petronas dividend expected in 2027 and petroleum-related revenue of RM61.2 billion, about 16% of government revenue. The Finance Ministry’s 2027 planning price is US$78 a barrel, according to The Edge (some reports say US$85), so US$98 Brent does not break the budget. A slide into the US$70s would shrink the windfall and the subsidy bill together.
• Bursa energy stocks. On Thursday the Bursa Malaysia Energy Index fell 2.59% while the KLCI rose 1.19%; refiner Hengyuan lost 15.75% and Hibiscus Petroleum 7.28%. The KLCI closed Friday at 1,616.58. Bursa is shut on Monday for Deepavali.
• The ringgit. It closed Friday weaker at 4.0565 to the US dollar, and analysts blamed the global risk-off mood and chip sell-off, not oil.
• Gold, US indices and the Fed. US inflation is 3.7%, with petrol up 34% in a year, so cheaper oil takes some heat off the Fed before its 9 December meeting. Friday’s jobs report, 165,000 new jobs against about 65,000 expected, pushed the other way, and markets still priced roughly a 77–80% chance of a December hike. For XAUUSD and NAS100, watch Tuesday’s US inflation data at 9:30pm Malaysian time.

FAQ

Why did oil prices drop so much this week?

The US midterm result raised hopes that Washington would push to end the war with Iran, Gulf supply has recovered while high prices cut demand, and funds that had bet on higher prices sold at the same time. Brent fell more than 16% to US$98.32.

Is the Strait of Hormuz open or closed?

Neither, fully. Iran restricts and attacks shipping and the US is blockading Iranian ports, but about 11 million barrels a day of crude passed through in October, roughly 70% of the pre-war flow, according to Kpler.

Will petrol prices in Malaysia go down?

Subsidised RON95 under BUDI95 stays at RM1.99. Unsubsidised RON95, RON97 and diesel are set weekly and fell 15 to 20 sen for 5–11 November; the next prices, due on Wednesday 11 November, should reflect this week’s fall if oil stays lower.

Could oil go back above US$100?

It could. No deal has been signed, tanker attacks continue, and Rapidan Energy Group puts the chance of renewed fighting at 80%. After an earlier ceasefire in April, Brent climbed back from the low US$90s to US$118 within three weeks.

Summary

Oil had its worst week since 2020 because the market changed its bet, not because Hormuz became safe. The midterm result raised the odds of a deal with Iran, Gulf oil is flowing at about 70% of its pre-war pace despite the attacks, JPMorgan sees a surplus, and crowded bullish bets unwound at once. Brent is still more than a third above its pre-war price and could rebound if talks fail. For Malaysians, RM1.99 petrol does not change, but unsubsidised fuel is cheaper, the subsidy bill gets easier and Petronas’s budget contribution smaller.

Disclaimer

This article is for education only and is not investment advice. Figures are from exchange settlements, news reports and official releases as of 10:00am Malaysian time on Saturday 7 November 2026, using Friday 6 November closing prices. Markets are closed for the weekend and prices will move when trading resumes. Do your own research or consult a licensed adviser before trading or investing.

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