What will or won\u2019t happen with the U.S. and Iran has oil producers, refiners, traders, and everyone in between in speculation mode. <\/p>\n
West Texas Intermediate is currently trading at around $65 a barrel<\/a>, but don\u2019t count on it staying at that price. News about a potential U.S. military intervention<\/a> in Iran have caused oil prices to rise and fall over the last couple weeks. That\u2019s because of just how much of the world\u2019s oil is produced by Iran and its neighbors.<\/p>\n The story starts with the Strait of Hormuz off the coast of Iran, said Tom Seng, assistant professor of energy finance at Texas Christian University. <\/p>\n \u201cFrom a crude oil perspective, this is a choke point<\/a>,\u201d he said.<\/p>\n Roughly 20% of global oil travels through the strait,<\/a> a narrow passage from the Persian Gulf to the open sea. So, Seng said there\u2019s some different scenarios to consider.<\/p>\n \u201cDo we impose more sanctions that can actually stop Iranian exports? Or, number two, does there become some type of a conflict where now ships passing through the Strait of Hormuz are in danger, or there\u2019s a blockade?\u201d Seng said.<\/p>\n Dan Pickering, founder and chief investment officer of Pickering Energy Partners, said we could either see a big Middle East war, or nothing at all. Either scenario would affect prices.<\/a><\/p>\n \u201cIn those scenarios, oil is probably anywhere from back into the ($)50s to over ($)100, which is obviously a very wide range,\u201d he said. \u201cThe marketplace tries to assign probabilities on all of these possible outcomes and bakes in a premium.\u201d<\/p>\n Oil is more expensive today because of something that may or may not happen off the coast of Iran tomorrow, or next month, Pickering said. That\u2019s good for oil producers, because they get to sell oil at a higher price.<\/p>\n \u201cThen there are the intermediaries who thrive on volatility, so higher volatility means more chances to trade around price,\u201d Pickering said.<\/p>\n