However, a desperate Iran could bomb or plant mines throughout the strait, creating a blockade. Iran also could target its neighbors, especially Saudi Arabia and the UAE. \u201cAll bets are off if the Supreme Leader (86-year-old Ayatollah Ali Khamenei) decides it\u2019s truly a fight for regime survival,\u201d said Matt Reed, vice president of the geopolitical and energy consultancy Foreign Reports.\u00a0<\/p>\n
Reed said the situation today is \u201cmore alarming\u201d than last summer because the U.S. and Iran seem far apart on any redefined nuclear deal\u2014President Donald Trump pulled out of the previous nuclear agreement in 2018\u2014and Iran already is under pressure as the regime violently tries to subdue civil unrest.<\/p>\n
\u201cIran is infinitely more desperate today. It\u2019s facing an existential fight, potentially, which means it\u2019s more inclined to lash out if only to raise the cost of U.S. intervention,\u201d Reed told Fortune. \u201cBack against the wall, the regime in Tehran may choose to strike its oil-rich Arab neighbors because they\u2019re easy targets and everyone stands to lose from a massive oil price shock.\u201d<\/p>\n
\u201cThe odds of diplomatic breakthrough are fading by the day,\u201d he added. \u201cBoth sides are repeating the same tired talking points we heard a year ago.\u201d<\/p>\n
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<\/p>\n
Pricing out a conflict<\/p>\n
The U.S. benchmark for oil was hovering above $66 a barrel as of Feb. 20\u2014up almost $10 per barrel already just from Iranian tensions. That premium suggests energy markets see a roughly 25% chance of a major Middle Eastern conflict, Pickering said.<\/p>\n
So, the odds still favor a peaceful outcome or a more modest military conflict with some initial strikes that force stronger negotiations.<\/p>\n
After all, Trump is focused on energy affordability during a midterm election year, and he has always desired bringing U.S. oil prices down to $50 per barrel\u2014below the $60 threshold most oil producers need for profitability. The $50 level would pull the average retail price of a gallon of regular unleaded fuel down closer to $2.50. The current average gasoline price is $2.93 per gallon and rising, according to AAA.<\/p>\n
The numbers point to Trump wanting a deal with Iran, Pickering said. But OPEC also is talking about hiking its volumes again\u2014led by the Saudis and the UAE\u2014which could help partially offset a more modest military conflict, he added.<\/p>\n
Nothing would offset a blockade of the Strait of Hormuz, which is simply unsustainable over a long period for global energy markets, said Claudio Galimberti, chief economist for the Rystad Energy research firm.<\/p>\n
A contained Iran conflict would push oil prices up by another $15 to $20 per barrel, above $80, Galimberti said. Any impact to the strait would force a spike above $100 per barrel, potentially sending gasoline closer to $5 per gallon.<\/p>\n
On the other hand, a peace deal would push the U.S. benchmark below $60 per barrel. And a broader deal that would remove sanctions from Iranian oil and allow it to export to more markets could bring prices down another $5, closer to Trump\u2019s desired $50 per barrel, Galimberti said. After all, global energy markets are currently oversupplied, and adding more Iranian barrels would trigger very low oil prices.<\/p>\n
\u201cWe don\u2019t discount the fact that you could have a diplomatic resolution and a new nuclear deal,\u201d Galimberti told Fortune. \u201cIt does look like it\u2019s a little bit of a long shot.\u201d<\/p>\n
\u00a0The bottom line is \u201ceveryone in the world wants to avoid\u201d blocking the Strait of Hormuz, he said. But either a desperate Iran or an accidental errant bomb changes the equation.<\/p>\n
As Pickering added, \u201cIran\u2019s ability to wreak havoc is pretty high if it decides to take that step. It\u2019s a really big step, because then you\u2019ve poked the bear.<\/p>\n
\u201cThey didn\u2019t take that step when bombs were literally falling in June.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The largest U.S. military buildup since the 2003 Iraq invasion is aimed at Iran, and the outcome of…\n","protected":false},"author":2,"featured_media":302505,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[53725,54,42,87,43,40,38,41,39],"class_list":{"0":"post-302504","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-headlines","8":"tag-crude-oil","9":"tag-donald-trump","10":"tag-headlines","11":"tag-iran","12":"tag-news","13":"tag-top-news","14":"tag-top-stories","15":"tag-topnews","16":"tag-topstories"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/302504","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=302504"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/302504\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/302505"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=302504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=302504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=302504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}