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Source: Newsmaker.id
Brent crude oil prices faced downward pressure during Tuesday’s trading (November 10), hovering around $91 per barrel as market concerns regarding an escalation of geopolitical conflict in the Middle East began to subside. Brent was recorded at $91.88 per barrel, following a decline of approximately 5.85% in the previous session. This weakness continues a sharp correction from the highs seen in late October, when prices reached $118 per barrel. The shift in market sentiment followed signals from U.S. President Donald Trump that further military action against Iran was not currently necessary, thereby easing fears of potential disruptions to the global energy supply.
The decline in oil prices is primarily driven by a reduction in the geopolitical risk premium that had previously pushed energy costs higher. Hopes for diplomatic progress between Washington and Tehran have led market participants to anticipate a lower risk of supply disruptions. Nevertheless, uncertainty continues to loom over the Middle East, as the United States maintains a naval blockade in the Strait of Hormuz, and threats to shipping activities have not entirely vanished. Consequently, oil prices remain sensitive to both diplomatic developments and the potential for a resurgence in military tensions.
From a fundamental perspective, an increase in oil production by OPEC nations in October has also exerted downward pressure on Brent prices. Higher output from Saudi Arabia, Kuwait, and Iraq has fueled concerns that global oil supply could rise at a time when demand has yet to show a commensurate strengthening. On the other hand, lower oil prices could potentially help alleviate inflationary pressure in the United States by reducing energy, transportation, and production costs. However, the impact on consumer inflation is not always immediate, as changes in the prices of fuel, goods, and services take time to be reflected in economic data. As a result, market participants are closely monitoring the upcoming U.S. Consumer Price Index (CPI) release for October to gauge the evolution of price pressures.
Regarding the US Dollar (USD), a decline in Brent crude prices could exert pressure on the American currency through two primary channels. First, an easing of geopolitical tensions may reduce demand for the dollar as a "safe-haven" asset, as investor appetite for riskier assets grows. Second, weaker energy prices could lower US inflation expectations, potentially creating room for a more accommodative monetary policy from the Federal Reserve—provided that other inflationary pressures also subside. Such conditions could limit any strengthening of the dollar by dampening expectations for interest rates and Treasury bond yields. Nevertheless, should core US inflation remain high or geopolitical tensions in the Middle East flare up again, the dollar could still find support. Ultimately, the future trajectory of the USD will be shaped by a combination of oil prices, geopolitical developments, and US inflation outcomes. (CP)