US-Iran Conflict Increases Risk of Sustained Fighting, Crude Price Premium

Renewed and sustained fighting between the US and Iran could keep a geopolitical risk premium of $15-20 a barrel embedded in crude prices, after Brent surged above $85 from $72 at the start of the month amid maritime attacks and Washington’s renewed naval blockade of Iranian ports. Rystad Energy has raised the probability of sustained fighting to 20%, while the combined likelihood of no substantive agreement has climbed to 55%. A prolonged stalemate now carries a 35% probability, against 40% for a narrow agreement and just 5% for a full resolution. The August 16 expiry of the 60-day memorandum of understanding negotiation window has become the critical near-term date for oil markets, with the Strait of Hormuz again facing severe disruption. “The narrow deal is still our base case, but it has become a considerably less comfortable one,” said Jorge León, senior vice-president and head of geopolitical analysis at Rystad Energy. Washington wants lower oil prices and a diplomatic outcome ahead of the November midterm elections, while Tehran has an economic package involving access to frozen assets and export waivers that it does not want to abandon permanently, León said. “The problem is that the MoU has not moved the needle on its hardest elements: nuclear limits and who controls commercial passage through Hormuz,” he said. “After Aug. 16, the question becomes whether the shipping market can adapt to a continuing threat rather than whether diplomacy can resolve one.” Under the renewed-fighting scenario, negotiations collapse, direct military activity broadens and the threat to Gulf energy infrastructure increases. Iran restricts commercial passage, while the US maintains maximum sanctions enforcement and a full blockade of Iranian ports. Strait traffic would remain close to 2 million barrels per day before August 16, Iranian oil exports would be limited to around 300,000 bpd, and bypass flows would fall to about 3.5 million bpd. Dark-fleet movements and selective passage could lift traffic towards 3.5 million bpd by November. Rystad said recent events showed how quickly a fragile diplomatic framework could unravel through miscalculation or attacks on commercial shipping. A stalemate would sustain a lower but still significant $10-15-a-barrel premium. Under this scenario, negotiations remain open without a meaningful agreement, while calibrated military pressure and periodic incidents continue. Shipowners, insurers, governments and traders would gradually adapt through bilateral assurances, selective US enforcement and timed convoys. Strait traffic could rise from 2.5 million bpd in August to around 8 million bpd by November, while nearly 7 million bpd moves through bypass routes. A narrow agreement would retain a $5-10 premium, with traffic recovering to about 10 million bpd by mid-August and 14 million bpd by October. A full resolution would reduce the premium to $0-2 a barrel.