- Oil prices surge on fears of supply disruptions through the Strait of Hormuz, a key route for about a third of global seaborne oil.
- President Donald Trump is weighing limited military strikes on Iran within days to pressure it into a nuclear deal, with U.S. officials briefing readiness as early as Saturday.
- Experts diverge on market impact: some see retaliation risks already priced in, while others warn oil could top $100 per barrel if flows are disrupted, though limited action may keep any spike temporary.
Oil markets are jittery as geopolitical tensions escalate, with traders closely monitoring developments that could roil global energy supplies. According to people familiar with the matter, President Donald Trump is considering limited military strikes on Iran in the coming days, aiming to bolster diplomatic efforts in ongoing indirect nuclear talks in Geneva. This has sent crude prices higher, driven by concerns over potential disruptions to the Strait of Hormuz, a critical chokepoint for seaborne oil shipments.
U.S. national security officials have informed Trump that strikes could occur imminently, targeting military or government sites short of full-scale war, while still favoring diplomacy. The indirect talks on Tuesday were described as "constructive" by Iranian representatives, but sources indicate they remain far apart on key issues like uranium enrichment, ballistic missiles, and proxy activities. Follow-up discussions are expected in the coming weeks, adding a layer of uncertainty to the timeline.
In response to the heightened risks, Trump has set a 10-15 day deadline for progress and deployed a second carrier strike group, the USS Gerald R. Ford, to the Middle East, signaling resolve. Iran has warned of retaliation against U.S. bases and conducted rocket launches in the south on Thursday, further stoking fears of escalation. Efforts to reach the White House for comment were unsuccessful, but officials have emphasized past successful operations in similar contexts.
Market analysts are split on the implications. John Kilduff of Again Capital suggests that retaliation risks are already factored into current prices, while Bob McNally of Rapidan Energy Group warns that oil could surge above $100 per barrel if flows through the Strait of Hormuz are halted. In contrast, Natasha Kaneva at JPMorgan (JPM) and Daan Struyven at Goldman Sachs (GS) anticipate only temporary spikes from limited, targeted action, keeping broader disruptions in check.
Broader political dynamics add complexity. Trump prefers diplomacy but has discussed strike options with aides and told Israeli Prime Minister Benjamin Netanyahu that he would back Israeli action on Iran's missiles if talks fail. Secretary of State Marco Rubio plans a visit to Israel soon, though no coordination with Israel has been confirmed. Iran's Supreme Leader Ali Khamenei has threatened severe retaliation, and the regime rejects expanding talks beyond nuclear issues, creating a tense standoff.
Stakeholders are bracing for potential fallout. U.S. and Israeli allies are on high alert, while Iranian protesters amid ongoing crackdowns may face increased regime pressure. Global energy consumers could see higher prices if disruptions materialize. In a related move, Norway has relocated 60 troops from the Middle East over security concerns, and an Israeli poll shows 59% support for joint U.S. strikes, reflecting public sentiment in the region.
This escalation builds on military planning from late January, including commando options on nuclear sites, tied to Iran's domestic unrest and prior U.S. strikes on its facilities. Trump referenced past attacks at Fort Bragg, warning of worse responses if provoked, echoing tensions from 2019-2020 but with a renewed focus on nuclear negotiations. Looking ahead, strikes are possible by the weekend or within 10 days if no deal is reached, risking Iranian counterstrikes and further oil volatility. Experts predict that limited action would keep disruptions temporary, but a broader assault could have more severe consequences, such as regime change or nuclear dismantlement, according to sources familiar with the discussions.