Oil's 7% plunge offers Chile rare macroeconomic relief amid stalled growth

The more than 7% plunge in Brent crude prices turned Monday into a singular session for Chilean markets, triggering a cascade of effects that ran from the exchange rate to the composition of the equity index, and opening a window of macroeconomic relief at a moment when the real economy is barely managing to hold onto positive ground.

The signal came from Washington and Tehran. Statements from President Donald Trump—who said Iran wants to "reach a deal"—and the conciliatory remarks from Secretary of State Marco Rubio precipitated a massive unwinding of long positions in crude. At the close, Brent for January 2027 delivery was down 7.44%, to US$104.99 per barrel, while WTI retreated 7.14%, to US$96.69. The fact that the barrel is still trading above US$100 after accumulating gains of more than 70% year-to-date illustrates just how far energy markets have been operating under a considerable war premium. A sustained diplomatic de-escalation would represent significant cost relief for a net energy-importing economy like Chile's.

The impact on the FX market was immediate and amplified by a domestic policy decision. The dollar closed down $16.30, at $977 per unit, its largest single-session drop since October 5. The local catalyst was the announcement by the Budget Office (Dipres) that it will raise the limits of its FX liquidation program for November, with sales of up to US$1 billion per week—against a maximum of US$600 million in October. The market read that flow as sustained selling pressure throughout the month and responded accordingly. The coincidence between the external shock and the Treasury's FX intervention amplified the move, a reminder that the exchange rate remains the main transmitter of fiscal tensions into Chile's real economy.

Against that backdrop, the IPSA closed higher with unusual momentum: LATAM Airlines jumped more than 7%, directly benefiting from lower fuel costs. The performance stood in contrast to Wall Street, where the Nasdaq Composite lost 1.1% and the S&P 500 retreated 0.5%, while the Nasdaq 100 confirmed a technical correction with a cumulative decline of 10% from its latest peak. The divergence between Santiago and New York in this session reflects the fact that the vectors moving the Chilean market are distinct—and, this time, favorable.

All of this is unfolding while the real economy continues to send mixed signals. The September Imacec grew 0.2% year-over-year, returning to positive territory after the declines of July and August, but without generating genuine enthusiasm. The reading was sustained entirely by the non-mining sector, whose Imacec advanced 2%—with commerce recovering 4%—while mining contracted 12.1% in its third consecutive decline and second double-digit drop. Finance Minister Rodrigo Quiroz attributed the mining deterioration to "many years of uncertainty and low investment," a reading that bi-ministerial head of Economy and Mining Nicolás Mas complemented with caution: "we receive this figure with humility," he said. Analysts warn that October could show another contraction, which would consolidate expectations of a negative 2026 GDP print. The tension between the Finance Ministry's optimism regarding 2027 and the Central Bank's warnings over that same horizon has not been resolved, and the September figure is not enough to settle it.

Fiscal pressure is another front that has intensified. Dipres data show that gross public debt reached 44.7% of GDP in the third quarter—a record since the return to democracy—just 30 basis points away from the 45% threshold considered prudent. The rise in the exchange rate, which moved from $922 to $970 per dollar between quarters, by itself added about 0.7 percentage points of GDP to the debt increase, given that more than a third of sovereign liabilities are denominated in foreign currency. The Autonomous Fiscal Council had already warned about this sensitivity in its most recent report. Today's drop in the dollar momentarily reduces that pressure, but does not alter the structural trend.

In that environment of fiscal restraint, the budget debate is adding political tension. The joint committee advanced on the first items of the 2027 Budget, but negotiations are far from smooth. Senator Yasna Provoste announced that the opposition will reject the Ministry of Justice line while Minister Fernando Rabat remains in office, amid the controversy over reduced sentences for those convicted of sexual crimes against minors. Renovación Nacional, for its part, questioned the "political leadership" of President José Antonio Kast's government, though it ruled out withdrawing its support for the Executive. The political crisis is not systemic, but it does complicate the government's room to maneuver in a budget process that requires agreements to keep moving forward, particularly on sensitive items such as education and regional governments.

In the private sector, third-quarter earnings season delivered a genuine positive note. The median Ebitda growth of six IPSA companies was 14.7% year-over-year, with a mean of 22%. The three largest private banks—Banco de Chile, Santander and Bci—raised their earnings and expanded their loan books, although they anticipated a combined accounting impact of nearly $147 billion stemming from the corporate tax cut, a figure the market has already priced in but which tempers the read on the financial sector. The mortgage rate subsidy program, meanwhile, surpassed 35,000 loans granted, with 123,000 eligible applications, although gross home sales in the Metropolitan Region fell 10% in the third quarter from a year earlier, evidence that state support has yet to reverse the real estate cycle.

The environmental approval of the Puerto Exterior de San Antonio, a US$4.25 billion project that also received the green light from the Committee of Ministers, and the truckers' strike at that same port—which threatens the fresh fruit export season at a moment when "every day counts to safeguard the cold chain," according to the SNA—precisely illustrate the paradox of the Chilean economy: long-term infrastructure projects are advancing while present-day logistical frictions remain unresolved.

In the coming weeks, the determining factors will be the outcome of the US midterm elections and their effect on oil geopolitics, the evolution of the exchange rate as the Treasury intensifies its dollar sales, the October Imacec, and the progress—or blockage—of the most contentious items of the 2027 Budget. The window of relief that Middle East diplomacy opened today is real, but fragile.

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