Uncertainty is a dominating theme in the world at the moment. Trump’s escalation of conflict with Iran has, begrudgingly, roped in most of the world (put crudely, excuse the pun), with the Middle East and Iran taking the brunt of the violence and destruction on the ground and just about everybody else being affected by rising crude oil prices.
The question that’s really on everybody’s lips now – the same question that experts and “laymen” alike have been asking since Trump made it clear that his sights were set on Iran – is, what’s next?
Where do we go from here, and how does this war end? Will economic pressure be enough to force one side into submission? Or will this be a continued back and forth of bombing, missiles and threats until one side can’t go on any longer? Given the plethora of variables involved in the current situation – from an endless number of geopolitical issues with massive global economic ramifications to the simple issue of overinflated and unpredictable egos – predicting how this is going to end is nothing more than a fool’s game.
Alas, we continue to speculate and predict – as we should and most likely always will – and our focus now, among many other points of interest, is what actually needs to happen in order for oil prices to stabilise.
What’s Causing the Volatility and Escalation of Crude Oil Pricing?
At a high level, oil prices are climbing for a fairly simple reason: uncertainty around supply.
But beneath that simplicity are two very real pressure points shaping the market right now – the instability around the Strait of Hormuz, and the ongoing sanctions and tariffs imposed by Donald Trump on Iran.
The Strait of Hormuz is arguably the most important oil transit route in the world, with a significant portion of global crude supply passing through it every day. When that flow is threatened for whatever reason – whether through military escalation, blockades or even the possibility of disruption – markets react almost instantly.
And that’s exactly what we’re seeing now. Even without a full closure, heightened tensions in the region create a kind of “risk premium” on oil. Traders price in the possibility that shipments could be delayed, rerouted or halted entirely, and the broader result (the one that everybody else sees and feels) is volatility – sharp spikes, sudden drops and a general sense that prices could move dramatically at any moment.
Because oil sits at the centre of the global economy, that volatility doesn’t stay confined to markets – as much as we wish it was, it’s very much not out of sight, out of mind for ordinary people. In fact, it filters through everything.
Major economies like the United States and the United Kingdom feel it through inflation, supply chain costs and economic uncertainty, while for ordinary people, it shows up far more directly – at the petrol pump. When oil prices spike, fuel becomes more expensive, transport costs rise and everyday goods – from food to clothing – often follow suit. The knock-on effect is massive, and the longer this goes on, the more everybody’s going to feel it.
Layered on top of this is the economic pressure being placed on Iran. US sanctions and tariffs have significantly restricted Iran’s ability to export oil freely, effectively removing supply from the global market. Less supply, combined with the threat of further disruption, creates a perfect storm for rising prices, and that’s where we are now.
The “Obvious” Solution And Why It’s Not Happening
On paper, the solution seems relatively straightforward – stabilise and fully reopen the Strait of Hormuz, and allow oil to flow freely again.
Sure, great idea! But geopolitics is rarely that simple, and the chances of that happening anytime soon, without major discussion, is very unlikely.
Now, the Strait isn’t just a shipping route – it’s a strategic lever. For Iran, it represents one of the few points of real influence in a situation where it’s otherwise economically constrained. Keeping the threat of disruption alive gives it bargaining power. It’s kind of one of the last bargaining chips it has, but it’s a strong one and Iran is getting everything it possibly can out of it.
For the US, maintaining sanctions is part of a broader strategy to apply pressure on what it has repeatedly framed as a hostile regime – this has kind of been a large part of the justification for escalating the tension altogether. So, rolling those measures back isn’t just an economic decision, it’s a political one. It would be a huge statement, and it would risk undermining the narrative that the current approach is justified and necessary.
Put simply, it would, most likely, be seen as an admission of fault and error of the US. A huge blow to America’s collective eog, and more importantly these days, Trump’s ego.
So, in other words, both sides have pretty significant incentives to hold their ground, and that’s what’s keeping the situation locked.
Would Lifting Sanctions Actually Help?
This is where the debate becomes more nuanced. Some analysts argue that easing sanctions and tariffs on Iran could indirectly stabilise oil markets. The logic here is that reducing economic pressure might encourage de-escalation, making Iran more likely to ensure safe passage through the Strait of Hormuz and resume normal export levels.
In theory, that would increase global supply and reduce the risk premium currently baked into prices, but there are two major issues with this.
First, there’s no guarantee that lifting sanctions would lead to immediate behavioural change. This is based on an assumption that Iran will react in a specific way, and there’s no way to guarentee this. The relationship between the US and Iran is shaped by decades of tension, and trust is in short supply. Any policy shift would likely take time to translate into real-world outcomes – if it does at all.
Second, and maybe more importantly, the political cost of reversing course is high. Easing sanctions could be interpreted as a softening of stance or even an admission that the current strategy isn’t working. Given the rhetoric around national security and regime opposition, that’s not a move that comes easily. And the US isn’t for taking a step back and de-escalating.
So while lifting sanctions could help in theory, in practice it remains unlikely – at least in the near future.
A Market Stuck In Limbo – In Perpetuity?
What this leaves is a market caught between two competing forces – the clear economic need for a stable supply (globally), and the political realities preventing it from happening.
Until there’s either a meaningful de-escalation in the region or a significant policy shift, oil prices are likely to remain volatile – reacting not just to actual disruptions, but to the constant possibility of them. And sometimes, the possibilities and expectations surrounding these possibilities are more dangerous than reality and implementation.
And for now, that uncertainty is doing just as much damage as any physical supply shock.
Expert Comments
A few experts contributed their thoughts to the topic; here’s what they had to say.
Gaurav Srivastava, Global Energy and Commodities Investor
“The debate over Iranian oil has resurfaced with renewed urgency as global crude prices remain elevated, straining households, businesses, and governments alike. While some policymakers argue that lifting U.S. sanctions on Iran could provide near-term relief to tight energy markets, the reality is far more complex – both economically and geopolitically – and increasingly shaped by the opaque actors who operate within and around the sanctions regime.
“At first glance, the case for allowing more Iranian crude onto global markets appears straightforward. Iran holds production capacity of roughly 3-4 million barrels per day, much of it constrained by sanctions. In theory, restoring even a portion of that supply could help ease price pressures. Yet global oil pricing is not governed by simple supply additions. It reflects a layered interplay of OPEC+ production decisions, geopolitical risk premiums, refining bottlenecks, and critical transit chokepoints such as the Strait of Hormuz.
“Even if sanctions were lifted, the impact would likely be gradual rather than immediate. Years of underinvestment have affected Iran’s production infrastructure, and scaling exports would take time. Moreover, financial institutions, insurers, and commodity traders remain wary of regulatory exposure, meaning that re-entry into Iranian markets would not happen overnight. As such, any downward pressure on prices would likely be incremental, not transformative.
“More importantly, the issue extends beyond market mechanics into national security. Iranian oil revenues are widely understood to underpin the regime’s regional activities, including support for proxy groups such as Hezbollah and the Houthis. This presents a fundamental policy dilemma: whether short-term economic relief is worth the risk of enabling longer-term instability. For many policymakers, this trade-off remains unacceptable.
“Complicating this picture further is the growing sophistication of sanctions evasion networks – an area where figures like Niels Troost have become emblematic. Troost’s activities highlight how sanctioned oil – whether Russian or Iranian – can be rerouted, rebranded, and reintroduced into global markets through complex trading structures. By exploiting regulatory gaps, political divisions, and jurisdictional inconsistencies, such actors demonstrate that sanctions, while powerful, are far from impermeable.
“These dynamics underscore a critical point: even under strict sanctions, Iranian oil is not fully removed from global circulation. Instead, it often flows through intermediaries, shadow fleets, and blended cargoes that obscure its origin. This raises serious questions about the effectiveness of enforcement and the unintended consequences of partial compliance. If sanctions can be so readily circumvented, then simply lifting them may do little to fundamentally alter market realities—while still carrying significant geopolitical costs.
“Neighboring Iraq further complicates enforcement efforts. While Iraqi oil exports are not sanctioned, there are persistent concerns about the diversion of revenues to Iranian-aligned militias and political factions. This creates a blurred line between sanctioned and non-sanctioned supply, allowing funds to move indirectly into networks that sanctions are designed to constrain. Without tighter oversight, financial leakage through such channels will continue to undermine policy objectives.
“There is also the enduring vulnerability of global energy transit routes. The Strait of Hormuz remains one of the most critical chokepoints in the world, with approximately 20% of global oil supply passing through it daily. Any disruption – whether from military escalation or political brinkmanship – can trigger immediate price spikes. While long-term solutions such as alternative pipeline routes have been proposed, these require years of investment and international coordination, offering little in the way of immediate relief.
“Domestically, the United States retains several levers to address energy price volatility. These include replenishing and strategically deploying the Strategic Petroleum Reserve, encouraging increased domestic production, and fostering a more robust private-sector presence in global energy trading. However, these tools must be deployed within a coherent and consistent policy framework – one that transcends political cycles and addresses both economic and security priorities.
“Ultimately, the notion that lifting sanctions on Iranian oil represents a quick fix to high global energy prices is overly simplistic. While it may marginally increase supply, it does not resolve the deeper structural and geopolitical challenges shaping today’s energy markets. As the example of Niels Troost illustrates, the real issue is not merely access to oil, but control over the systems through which it flows.
“A durable solution will require a comprehensive strategy – one that integrates enforcement, transparency, infrastructure investment, and geopolitical foresight. In that broader context, Iranian oil is not a silver bullet, but rather one piece of a far more intricate and consequential global energy puzzle.”
