Oil to Surge as US and Iran Appear Set for War, Fesharaki Says

The warning arrives at a critical moment for the global economy. Oil prices have already shown volatility amid military build-ups, nuclear negotiations, and fears of disruption to shipping routes. If hostilities emerge, the consequences could ripple far beyond energy markets — affecting inflation, trade, and economic growth worldwide.

A Market on Edge

According to Fesharaki, the possibility of war has injected a “risk premium” into oil prices. Analysts believe that even the threat of conflict is enough to drive traders to bid prices higher, anticipating supply shortages. He suggested crude could climb to between $90 and $100 per barrel, depending on how severe any disruption becomes.

At present, global benchmark oil has been trading well below those levels, meaning markets may not fully reflect the geopolitical risks yet. Historically, oil prices react quickly to tensions in the Middle East because the region remains one of the world’s most critical production hubs.

The renewed focus on supply risks highlights how fragile energy markets can be. A single military event — such as attacks on infrastructure or shipping — can instantly reshape price expectations.

The Strait of Hormuz Factor

One of the biggest concerns in a potential conflict involves the Strait of Hormuz, a narrow waterway through which a large share of global oil exports flows. Any disruption to this route could send shockwaves across the energy sector.

Iran has previously suggested it could restrict traffic through the strait if tensions escalate. Even limited interference, such as tanker delays or increased insurance costs, can raise prices significantly. Markets tend to respond not only to actual supply losses but also to perceived risk.

Because of this strategic chokepoint, analysts frequently view US-Iran relations as one of the most important geopolitical drivers of oil volatility.

Nuclear Talks and Diplomatic Pressure

The current standoff is closely tied to ongoing disputes over Iran’s nuclear program. Negotiations have struggled to produce a breakthrough, and both sides have increased pressure through sanctions, military deployments, and political rhetoric.

Fesharaki believes diplomacy faces major obstacles. From Tehran’s perspective, accepting strict conditions could weaken domestic legitimacy. From Washington’s perspective, failing to secure a deal raises security concerns. This stalemate increases the likelihood of confrontation — or at least prolonged instability.

Diplomatic talks scheduled in neutral locations have offered hope for de-escalation, but expectations remain low. Markets are therefore preparing for multiple scenarios, ranging from temporary flare-ups to broader regional conflict.

Why Oil Reacts So Strongly to War Risks

Oil is uniquely sensitive to geopolitical shocks because supply is geographically concentrated. Unlike many other commodities, a significant share of production comes from politically complex regions. This makes prices highly responsive to military developments.

If conflict disrupts production, exports, or transportation, supply tightens quickly. Even without direct damage, companies may reduce output for safety reasons, and shipping costs can rise. Financial markets also amplify the effect, as investors move into energy assets as a hedge against uncertainty.

Fesharaki emphasized that Iran has several ways to influence markets, including targeting regional infrastructure or pressuring neighboring producers. Such scenarios could extend the impact beyond a single country.

Broader Economic Implications

A surge in oil prices would not occur in isolation. Higher energy costs often feed into transportation, manufacturing, and consumer prices, contributing to inflation. Central banks may then face tougher decisions on interest rates, potentially slowing economic growth.

For importing countries, expensive oil can widen trade deficits and strain public finances. For exporting nations, it may bring short-term revenue gains but also increase volatility.

Stock markets typically react unevenly. Energy companies often benefit from rising prices, while sectors reliant on fuel — airlines, logistics, and heavy industry — may face pressure.

The Risk of Regional Escalation

Another major concern is that a US-Iran confrontation could draw in other Middle Eastern countries. Attacks on infrastructure in neighboring states, or proxy conflicts involving regional groups, could expand supply disruptions.

Energy analysts note that even a limited conflict can trigger cascading effects. Insurance premiums for shipping rise, production facilities operate cautiously, and governments release strategic reserves. All of these factors influence price dynamics.

Because of these risks, investors closely monitor military movements, diplomatic signals, and statements from energy experts.

Not All Analysts Expect Extreme Spikes

While many forecasts point toward higher prices, some analysts remain cautious about predicting a sustained surge. They argue that global production capacity, strategic reserves, and potential diplomatic breakthroughs could limit long-term price increases.

Markets also tend to overshoot during crises and then stabilize once uncertainty fades. If negotiations resume or tensions ease, the risk premium could disappear quickly.

Nevertheless, the possibility of short-term spikes remains high, especially if unexpected events occur.

A Defining Moment for Energy Markets

Fesharaki’s warning underscores a broader reality: geopolitical tensions remain one of the most powerful forces shaping oil prices. As the United States and Iran navigate a fragile diplomatic landscape, markets must weigh the probability of conflict against hopes for negotiation.

The coming weeks could prove decisive. Diplomatic talks, military positioning, and political messaging will all influence investor expectations. Even without war, persistent tension may keep oil prices elevated.

For consumers and businesses, this means continued uncertainty. Fuel costs, transportation expenses, and inflation trends could all be affected by developments thousands of miles away.

In an interconnected global economy, the energy market often acts as the first indicator of geopolitical risk. Whether tensions escalate or cool, the situation between Washington and Tehran is likely to remain a central story — not only for oil traders, but for the world economy as a whole.