Democratic Control of Congress Raises Hopes of Iran Deal and Lower Crude Prices

The Democratic Party’s sweeping victory in the US midterm elections, giving it control of both chambers of Congress, has raised hopes of a possible diplomatic breakthrough in the Iran conflict and the restoration of energy supplies through the Strait of Hormuz. This could bring down global crude oil prices and provide significant relief to India, the world’s third-largest oil importer and fourth-largest refiner.

Lower oil prices would reduce India’s import bill, ease inflationary pressures and improve the financial position of oil marketing companies. Following the election results, Brent crude prices fell 8.7% to $94.62 per barrel on Wednesday.

However, the possibility of an early resolution remains uncertain. Although a Democratic-controlled Congress could increase pressure on the Trump administration to negotiate, President Donald Trump retains considerable authority over military action and foreign policy. Experts have also warned that the election setback could prompt a more aggressive US approach towards Iran.

India remains particularly vulnerable to disruptions in the Strait of Hormuz. Before the conflict, around 40% of its oil imports, 60% of LNG imports and nearly 90% of LPG imports passed through the strategic waterway. In the first six months of the current financial year, India's oil import bill rose 46.4% year-on-year to $90.6 billion.

Tougher US Sanctions on Russia Could Complicate India’s Energy Strategy

While falling crude prices would benefit India, a Democratic-controlled Congress could push Washington towards stricter sanctions against Russia over the Ukraine war. This could create difficulties for India's energy trade with Moscow, which has emerged as its largest crude oil supplier since 2022.

In September, Russian crude accounted for over 35% of India's total oil imports, with purchases reaching 1.9 million barrels per day. The Trump administration had recently eased certain restrictions on Russian energy exports, but Democrats may seek to reverse this approach.

Experts caution that tougher sanctions on Russian oil companies, banks and shipping networks could complicate payments, insurance and transportation for Indian refiners. Consequently, even discounted Russian crude may become more expensive by the time it reaches India.

For New Delhi, the challenge will be to balance the benefits of lower global oil prices with the risks of disruptions to Russian supplies and uncertainty in West Asia.