The US-Iran conflict is unlikely to trigger a major surge in oil prices; underlying risks remain despite rational market pricing.
2026-06-29 19:36:43
The current geopolitical standoff between the US and Iran presents a significant new characteristic in market pricing: Despite the weekend's military clashes, international crude oil futures opened flat, without the expected gap-up opening seen in traditional geopolitical conflicts. The energy market has largely adapted to the low-intensity friction pattern between the US and Iran. Such small-scale, non-escalating geopolitical games are unlikely to cause sustained disruptions to oil prices, becoming the most crucial pricing characteristic of the crude oil market at this stage.
Compared to the peak of geopolitical conflicts at the beginning of this year, when international oil prices briefly broke through the $100 mark and fluctuated wildly, the current Brent and WTI crude oil contracts, the two major players, have only experienced brief and minor price fluctuations following the US-Iran conflict, with prices quickly returning to stability. Overall, the trading community has categorized the routine, low-intensity skirmishes between the two sides as geopolitical noise and no longer uses it as a core pricing criterion, resulting in a significant increase in market pricing rationality.
The core issue in the current US-Iran standoff is the Memorandum of Understanding (MOU) reached in mid-June. Nearly ten days have passed since the agreement came into effect, but its implementation faces numerous obstacles. Iran has denied many of the US statements, disagreements persist on the details of the agreement's implementation, and bilateral wrangling has become the norm, failing to establish a stable ceasefire and cooperation framework.
The logic of Iran's strategic maneuvering: from leveraging energy and weapons to the institutionalized struggle over sovereignty in the Taiwan Strait.
In this round of bilateral negotiations, Iran has developed a clear strategic approach, the core of which is to leverage its influence over shipping in the Strait of Hormuz in exchange for policy easing regarding asset unfreezing and crude oil exports. Based on its distrust of the United States, Iran has maintained considerable operational flexibility within the framework of the memorandum, and has not been entirely bound by the agreement.
Iran continues to use drone strikes and other means to deter vessels that fail to notify it of their passage in advance. This move has dual strategic significance: first, it clearly asserts its sovereignty over the coast and strengthens its control over the Strait of Hormuz; second, through normalized gray-zone deterrence, it effectively restrains illegal passage and lays the foundation for subsequent normalized control and the implementation of toll mechanisms.
From a strategic perspective, the US has clearly demonstrated a willingness to strategically withdraw from the Middle East and has no intention of engaging in a full-scale military conflict with Iran. Regarding Iran's various gray-zone operations, the US will only implement small-scale, limited retaliatory actions, avoiding a full-scale military escalation. This asymmetric game further expands Iran's operational space in the geopolitical gray zone.
Meanwhile, the implementation of the memorandum has also placed Iran under passive constraints. With international oil prices remaining low, the effectiveness of Iran's traditional "energy weapon" has significantly diminished. In the early stages of the conflict, the disruption of navigation in the Strait of Hormuz drove oil prices sharply higher, bringing Iran a considerable increase in fiscal revenue. At the same time, high oil prices created inflationary pressure in the United States, forcing the US to compromise. However, the current continued decline in oil prices has not only weakened Iran's fiscal buffer but also made it difficult for it to leverage energy tools to provoke US inflationary anxieties, passively weakening its core bargaining chip in negotiations.
Professional market analysts point out that Iran's long-term goal is not short-term conflict and competition, but rather to transform its temporary control over the Strait of Hormuz into long-term institutionalized rights. Currently, Iran is actively engaging in dialogue with regional countries such as Oman, attempting to gain greater control over maritime services and waterway management within the framework of international law and coastal state sovereignty rules. This overall strategy encompasses multiple dimensions, including military deterrence, economic benefits, and diplomatic maneuvering.
Given its current disadvantage in the political game, Iran has a rational motive to deliberately create market instability. With low oil prices and the ineffectiveness of its energy weapons, its core strategy for reshaping its negotiating advantage is to increase the risk premium in the crude oil market through controlled localized friction and selective interference with navigation in the Strait of Hormuz. This aims to secure more favorable negotiating terms on key issues such as asset unfreezing, crude oil export quotas, and a long-term toll mechanism for the Strait of Hormuz.
Underlying pricing logic: Supply and demand buffers suppress geopolitical premiums, leading to more rational market pricing.
The core underlying logic behind the current oil price desensitization to geopolitical conflicts is that the global crude oil supply and demand have ample buffer space, completely weakening the pricing influence of localized geopolitical conflicts and making it difficult for geopolitical premiums to accumulate sustainably. Specifically, multiple supply-side support factors continue to exert their influence: the scale of US shale oil exports is steadily expanding, the Strategic Petroleum Reserve (SPR) is being released as needed in a timely manner, and the shipping capacity of alternative shipping routes such as the Cape of Good Hope is continuously expanding. At the same time, core OPEC+ members have sufficient potential to increase production. The combination of these multiple factors has effectively offset the supply risks brought about by localized disturbances in the Strait of Hormuz.
JPMorgan's global research team clearly predicts that the average price of Brent crude oil in 2026 will likely remain in the range of $60 per barrel. In the short term, the global crude oil market is unlikely to experience a sustained and disruptive supply shortage, and the oil price center has a solid bottom support.
From a short-term trading and pricing perspective, the core drivers of crude oil prices have shifted. They are no longer dominated by geopolitical events, but are more anchored to US employment data, API/EIA crude oil inventory data, and expectations of the Federal Reserve's monetary policy. Market pricing has completely broken free from emotional disturbances and returned to a rational framework dominated by fundamentals.
Potential tail risks: Low-probability, high-impact scenarios still require vigilance.
The market's desensitization to routine, low-intensity frictions does not mean that geopolitical risks have been completely cleared. The current crude oil market presents a pattern of "rational pricing and tail risks coexisting." While low-intensity conflicts are unlikely to trigger major price surges, three types of low-probability, high-impact tail scenarios warrant continued vigilance, as their triggering could rapidly rewrite the logic of oil price pricing.
First, the actual traffic volume in the Strait of Hormuz has declined sharply again, directly impacting the global crude oil transportation supply system. Second, the 60-day negotiation window between the US and Iran has broken down, and the bilateral game has escalated again. Third, Iran has coordinated with regional proxies to carry out joint operations, expanding the scope and intensity of the geopolitical conflict.
From a trading perspective, the market is already showing signs of hedging risks. Shipping data shows that while traffic in the Strait of Hormuz has recovered somewhat from the low point of the conflict, it remains significantly lower than pre-war peaks. In the options market, although implied volatility (IV) of crude oil prices has continued to decline, the volatility skewness indicator has continued to rise, reflecting that market traders are generally positioning themselves in advance to guard against the risk of rising oil prices.
From a macro perspective, the Federal Reserve's sensitivity to energy-driven inflation will continue to influence the correlation between the US dollar index and commodities. When risk events occur, this will further amplify the volatility of oil prices and exacerbate the impact of tail risks. Furthermore, there is a potential shift in the structure of the crude oil futures curve. The realization of tail risks could push the futures curve from a contango structure to a backwardation structure, causing a rapid increase in market volatility (energy VIX component).
Market Outlook: Risk patterns are evolving; focus on core variables to grasp the main market trend.
The current crude oil market has entered a new normal of "fighting while negotiating," with low-intensity geopolitical frictions being quickly absorbed by the market, directly reflecting the increasing maturity of the energy market. In the medium to long term, the deep trust deficit between the US and Iran, the high degree of uncertainty surrounding the implementation of the memorandum, and Iran's long-standing claims to the Strait of Hormuz will constitute persistent sources of volatility in the crude oil market. Geopolitical risks have simply shifted from "sudden and severe shocks" to "normalized, latent disturbances."
For market participants, it is essential to acknowledge the current rational pricing pattern driven by fundamentals, avoid blindly amplifying the impact of geopolitical noise, and prepare contingency plans for tail risk hedging in advance. In practice, strategies such as dynamic hedging and cross-commodity arbitrage can be used to mitigate volatility risk. Simultaneously, continuously monitoring two key indicators—real-time shipping data from the Strait of Hormuz and the progress of US-Iran negotiations—is crucial for accurately identifying market turning points.
Overall, the core pricing variable for international oil prices in the second half of the year will not be sporadic geopolitical conflicts, but rather the final implementation effect of the US-Iran memorandum of understanding. The market's desensitization to conflict is essentially an iterative restructuring of geopolitical risk patterns, not the end of risk, and this will be the core logic throughout the energy market trading in the second half of the year.
Compared to the peak of geopolitical conflicts at the beginning of this year, when international oil prices briefly broke through the $100 mark and fluctuated wildly, the current Brent and WTI crude oil contracts, the two major players, have only experienced brief and minor price fluctuations following the US-Iran conflict, with prices quickly returning to stability. Overall, the trading community has categorized the routine, low-intensity skirmishes between the two sides as geopolitical noise and no longer uses it as a core pricing criterion, resulting in a significant increase in market pricing rationality.
The core issue in the current US-Iran standoff is the Memorandum of Understanding (MOU) reached in mid-June. Nearly ten days have passed since the agreement came into effect, but its implementation faces numerous obstacles. Iran has denied many of the US statements, disagreements persist on the details of the agreement's implementation, and bilateral wrangling has become the norm, failing to establish a stable ceasefire and cooperation framework.
The logic of Iran's strategic maneuvering: from leveraging energy and weapons to the institutionalized struggle over sovereignty in the Taiwan Strait.
In this round of bilateral negotiations, Iran has developed a clear strategic approach, the core of which is to leverage its influence over shipping in the Strait of Hormuz in exchange for policy easing regarding asset unfreezing and crude oil exports. Based on its distrust of the United States, Iran has maintained considerable operational flexibility within the framework of the memorandum, and has not been entirely bound by the agreement.
Iran continues to use drone strikes and other means to deter vessels that fail to notify it of their passage in advance. This move has dual strategic significance: first, it clearly asserts its sovereignty over the coast and strengthens its control over the Strait of Hormuz; second, through normalized gray-zone deterrence, it effectively restrains illegal passage and lays the foundation for subsequent normalized control and the implementation of toll mechanisms.
From a strategic perspective, the US has clearly demonstrated a willingness to strategically withdraw from the Middle East and has no intention of engaging in a full-scale military conflict with Iran. Regarding Iran's various gray-zone operations, the US will only implement small-scale, limited retaliatory actions, avoiding a full-scale military escalation. This asymmetric game further expands Iran's operational space in the geopolitical gray zone.
Meanwhile, the implementation of the memorandum has also placed Iran under passive constraints. With international oil prices remaining low, the effectiveness of Iran's traditional "energy weapon" has significantly diminished. In the early stages of the conflict, the disruption of navigation in the Strait of Hormuz drove oil prices sharply higher, bringing Iran a considerable increase in fiscal revenue. At the same time, high oil prices created inflationary pressure in the United States, forcing the US to compromise. However, the current continued decline in oil prices has not only weakened Iran's fiscal buffer but also made it difficult for it to leverage energy tools to provoke US inflationary anxieties, passively weakening its core bargaining chip in negotiations.
Professional market analysts point out that Iran's long-term goal is not short-term conflict and competition, but rather to transform its temporary control over the Strait of Hormuz into long-term institutionalized rights. Currently, Iran is actively engaging in dialogue with regional countries such as Oman, attempting to gain greater control over maritime services and waterway management within the framework of international law and coastal state sovereignty rules. This overall strategy encompasses multiple dimensions, including military deterrence, economic benefits, and diplomatic maneuvering.
Given its current disadvantage in the political game, Iran has a rational motive to deliberately create market instability. With low oil prices and the ineffectiveness of its energy weapons, its core strategy for reshaping its negotiating advantage is to increase the risk premium in the crude oil market through controlled localized friction and selective interference with navigation in the Strait of Hormuz. This aims to secure more favorable negotiating terms on key issues such as asset unfreezing, crude oil export quotas, and a long-term toll mechanism for the Strait of Hormuz.
Underlying pricing logic: Supply and demand buffers suppress geopolitical premiums, leading to more rational market pricing.
The core underlying logic behind the current oil price desensitization to geopolitical conflicts is that the global crude oil supply and demand have ample buffer space, completely weakening the pricing influence of localized geopolitical conflicts and making it difficult for geopolitical premiums to accumulate sustainably. Specifically, multiple supply-side support factors continue to exert their influence: the scale of US shale oil exports is steadily expanding, the Strategic Petroleum Reserve (SPR) is being released as needed in a timely manner, and the shipping capacity of alternative shipping routes such as the Cape of Good Hope is continuously expanding. At the same time, core OPEC+ members have sufficient potential to increase production. The combination of these multiple factors has effectively offset the supply risks brought about by localized disturbances in the Strait of Hormuz.
JPMorgan's global research team clearly predicts that the average price of Brent crude oil in 2026 will likely remain in the range of $60 per barrel. In the short term, the global crude oil market is unlikely to experience a sustained and disruptive supply shortage, and the oil price center has a solid bottom support.
From a short-term trading and pricing perspective, the core drivers of crude oil prices have shifted. They are no longer dominated by geopolitical events, but are more anchored to US employment data, API/EIA crude oil inventory data, and expectations of the Federal Reserve's monetary policy. Market pricing has completely broken free from emotional disturbances and returned to a rational framework dominated by fundamentals.
Potential tail risks: Low-probability, high-impact scenarios still require vigilance.
The market's desensitization to routine, low-intensity frictions does not mean that geopolitical risks have been completely cleared. The current crude oil market presents a pattern of "rational pricing and tail risks coexisting." While low-intensity conflicts are unlikely to trigger major price surges, three types of low-probability, high-impact tail scenarios warrant continued vigilance, as their triggering could rapidly rewrite the logic of oil price pricing.
First, the actual traffic volume in the Strait of Hormuz has declined sharply again, directly impacting the global crude oil transportation supply system. Second, the 60-day negotiation window between the US and Iran has broken down, and the bilateral game has escalated again. Third, Iran has coordinated with regional proxies to carry out joint operations, expanding the scope and intensity of the geopolitical conflict.
From a trading perspective, the market is already showing signs of hedging risks. Shipping data shows that while traffic in the Strait of Hormuz has recovered somewhat from the low point of the conflict, it remains significantly lower than pre-war peaks. In the options market, although implied volatility (IV) of crude oil prices has continued to decline, the volatility skewness indicator has continued to rise, reflecting that market traders are generally positioning themselves in advance to guard against the risk of rising oil prices.
From a macro perspective, the Federal Reserve's sensitivity to energy-driven inflation will continue to influence the correlation between the US dollar index and commodities. When risk events occur, this will further amplify the volatility of oil prices and exacerbate the impact of tail risks. Furthermore, there is a potential shift in the structure of the crude oil futures curve. The realization of tail risks could push the futures curve from a contango structure to a backwardation structure, causing a rapid increase in market volatility (energy VIX component).
Market Outlook: Risk patterns are evolving; focus on core variables to grasp the main market trend.
The current crude oil market has entered a new normal of "fighting while negotiating," with low-intensity geopolitical frictions being quickly absorbed by the market, directly reflecting the increasing maturity of the energy market. In the medium to long term, the deep trust deficit between the US and Iran, the high degree of uncertainty surrounding the implementation of the memorandum, and Iran's long-standing claims to the Strait of Hormuz will constitute persistent sources of volatility in the crude oil market. Geopolitical risks have simply shifted from "sudden and severe shocks" to "normalized, latent disturbances."
For market participants, it is essential to acknowledge the current rational pricing pattern driven by fundamentals, avoid blindly amplifying the impact of geopolitical noise, and prepare contingency plans for tail risk hedging in advance. In practice, strategies such as dynamic hedging and cross-commodity arbitrage can be used to mitigate volatility risk. Simultaneously, continuously monitoring two key indicators—real-time shipping data from the Strait of Hormuz and the progress of US-Iran negotiations—is crucial for accurately identifying market turning points.
Overall, the core pricing variable for international oil prices in the second half of the year will not be sporadic geopolitical conflicts, but rather the final implementation effect of the US-Iran memorandum of understanding. The market's desensitization to conflict is essentially an iterative restructuring of geopolitical risk patterns, not the end of risk, and this will be the core logic throughout the energy market trading in the second half of the year.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
