The oil market sees the future of the Iran war as binary.
asserted
market → see → war
Either Tehran and Washington reach a deal — in days rather than months — or they head into an extended and worsening conflict.
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they → reach → conflict
With few signs of peace, the market is anticipating another round of hostilities, perhaps as soon as next week after the US midterm elections.
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market → anticipate → elections
There is a third path: The current deadlock becomes the new normal, creating a forever stalemate.
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deadlock → be → stalemate
With the on-off conflict already approaching 250 days and the price of oil hovering above $US100 a barrel, the prospect of months of continued standstill sounds bewildering, but I have increasingly heard — in private — that some executives in the top echelons of the global energy industry are starting to prepare for such an outcome.
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executives → approach → outcome
President Donald Trump says he wants to break the impasse.
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he → say → impasse
“I have a decision to make: Do I finish it off, which would be very easy to do, or do I make a deal?” Trump said in an interview with Fox News on October 25.
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Trump → have → October
Problem is that he’s made similar remarks multiple times since the war started.
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war → make → remarks
Seemingly, the Islamic Republic also wants to resolve the standoff; Supreme Leader Mojtaba Khamenei on Tuesday met with his security chief Mohsen Rezaee and reiterated his country’s conditions for ending the “neither war nor peace” situation, according to a statement from the leader’s office.
uncertain
Khamenei → want → office
Despite the diplomatic messaging, Tehran and Washington may still conclude that letting the status quo continue is preferable to either alternative.
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quo → conclude → alternative
Neither side wants to concede, but both are aware of the costs of another round of bombing.
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both → want → bombing
Despite what they say in public, Iran and the US both have good reasons to extend the impasse.
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Iran → say → impasse
For Iran, it would mean more economic damage, including destruction of critical infrastructure, leaving the regime vulnerable to social unrest.
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it → mean → unrest
Blockaded by the US Navy, it would remain unable to export its oil, perhaps until Trump leaves the White House in early 2029.
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Trump → blockade → 2029
For the US, it would mean significantly higher oil prices if Tehran retaliates, as it has promised, against regional energy capacity.
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it → mean → capacity
For the world, the Strait of Hormuz would remain neither fully closed nor fully open.
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Strait → remain → Hormuz
Extending the stalemate may be more manageable than it appears.
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it → extend → stalemate
For the White House, it’s all about oil.
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it → ’ → oil
Right now, the market is anticipating that the conflict will resume soon, which has driven West Texas Intermediate, the American oil benchmark, up by more than 10 per cent this month.
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which → anticipate → cent
But the jump hides how much crude is leaving the region despite a wave of Iranian attacks against tankers.
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crude → hide → tankers
During the first half of October, flows from the Middle East, excluding Iran, rose to about 16.5 million barrels a day, close to pre-war levels, according to Vortexa, a commodity intelligence firm.
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flows → exclude → Vortexa
More recent data, albeit incomplete, suggests the upward trend has continued.
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trend → suggest → ?
US Secretary of Energy Chris Wright said this month that supply was back to about 80 per cent of pre-war levels.
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supply → say → levels
“That doesn’t make us comfortable, but it has made a viable, reasonable price today,” he said.
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he → make → price
If oil stays around $US100 a barrel, perhaps Washington can just run down the clock, absorbing the increased energy costs and letting the blockade slowly cripple the Iranian economy.
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blockade → stay → economy
The less Trump talks about the next stage of the war as binary — either a deal or more bombing — the more likely crude can remain close to, or even below, the triple-digit level.
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crude → talk → level
It’s under unprecedented financial pressure.
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It → ’ → pressure
While the US has imposed sanctions on Tehran since the Islamic Revolution of 1979, it had never previously completely stopped the country from selling its oil.
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it → impose → oil
As a result, the Iranian economy is poised to suffer its worst contraction since during the Iran-Iraq war in the early 1980s.
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economy → poise → 1980s
Its currency, the rial, has lost about a quarter of its value against the US dollar in the past two months, making imported goods more expensive and stoking inflation.
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goods → lose → inflation
The Islamic Republic has demonstrated its capacity to endure financial suffering many times, and its pain threshold is likely even higher now that the threat is existential.
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threat → demonstrate → suffering
It helps that the Islamic Revolutionary Guards Corps can keep money flowing via its smuggling networks; it can probably ensure cash reaches the right people at the top of the regime for months to come.
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cash → help → months
Despite what they say in public, Iran and the US both have good reasons to extend the impasse.
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Iran → say → impasse
One of them may have to fold when the economic cost proves too high — either because the US fails to prevent a surge in oil prices, or because the Iranian economy collapses.
uncertain
economy → have → prices
But unless and until one of those things happens, the stalemate is likely to continue.
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stalemate → happen → things
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newsletter → deliver → stories
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