Analysts say the United States and Iran are leaning toward another war, even as hopes grew this week that a decisive Democratic victory in midterm elections would bring an end to the conflict.
Oil prices have fallen more than 16% in the past five business days after Vice President J.D. Vance publicly blamed the war for the Republican Party’s painful losses. Vance’s comments raised questions about whether there is still support within the administration for continuing the conflict with Iran.
Democrats plan to use their majorities in both chambers of Congress to pass the War Powers Resolution, which would require President Donald Trump to end the war. However, analysts say tensions in the Middle East have not eased even after the election, and the Democratic Party will not be sworn into office until January.
“Throughout this week, we were struck by the disconnect between the deepening concerns in the Gulf and the optimism of market participants thousands of miles away, driven by headlines,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told investors in a note Friday.
further attack
Since the election, several oil tankers have been attacked near Oman, killing one sailor, maritime security officials said. Yemen’s Iran-aligned Houthis continue to fire missiles at neighboring Saudi Arabia.
Meanwhile, the US military buildup continues, with the 3rd Carrier Strike Group on its way to the region. Consulting group Rapidan Energy estimates there is an 80% chance of fighting resuming amid the diplomatic standstill.
President Donald Trump told reporters Thursday that he will soon make a decision on whether to attack Iran again.
“Hopefully we don’t destroy the rest of this country, but we may have to,” Trump said from the Oval Office. “You’ll find out soon enough.”
“We are locked and loaded,” the president said. “If we have to deal with the rest of the Iran issue, we will be completely locked in.”
price risk
Bob McNally, president of Rapidan and a former energy adviser to President George W. Bush, said oil prices will rise above $100 a barrel again as the fighting intensifies. Brent crude, the international benchmark, was trading above $97 on Friday, compared with about $90 for U.S. crude.
“President Donald Trump is determined as a legacy item to prevent Iran from acquiring nuclear weapons and to force Iran to give up its nuclear capabilities at almost any cost,” McNally told CNBC’s “Squawk Box Asia” on Friday.
“The Iranian regime, on the other hand, is not willing to do that,” the analyst said. As long as the core differences between the United States and Iran remain, the dynamic of escalation will remain, he said.
Amos Hochstein, a former energy adviser to President Joe Biden, said the risk of war remains, especially since President Trump will not face an upcoming election. As a result, prices for gasoline, diesel and jet fuel will all rise, Hochstein said on CNBC’s “Power Lunch” on Friday.
Iranian provocation
The Iranian government has continued to provoke the Trump administration since the election. Iranian Supreme Leader Mojtaba Khamenei’s social media account said the interim results had “accelerated the process of disintegration of the United States.”
And Congress is unlikely to pass a war powers resolution until Democrats take power in January. President Trump can veto such resolutions in any case.
Croft said the main influence Congress has is the power of the purse. Government funding expires on Dec. 11, and negotiations for another continuing resolution could drag into 2027, he said. That will give Democrats more leverage when they take power in January, analysts said.
“Importantly, while delaying funding decisions will not immediately constrain President Trump’s ability to conduct military operations, it could materially change the administration’s long-term funding outlook,” Croft told investors.
President Trump discussed diplomatic efforts to ease tensions in the region with the emir of Qatar during a phone conversation on Friday, Qatar’s state news agency reported.
An anonymous Iranian official told Reuters on Thursday that Tehran had sent a nuclear proposal to the United States through Qatar. An Iranian official told Reuters that Tehran would only discuss the proposal after the US met its demands.
President Trump appeared to dismiss the diplomatic efforts Thursday.
The president said, “Iran will never possess nuclear weapons.” “They’re not doing anything without our approval. It doesn’t matter what they’re considering,” he said of diplomatic efforts.
