Reports that President Donald Trump is considering potential military options against Iran, alongside warnings that diplomacy may be running out of time, have kept the market alert to the risk of supply disruption in the Middle East. Any direct confrontation involving Iranian energy infrastructure, shipping lanes, or regional proxies would likely have immediate implications for flows through the Strait of Hormuz, a critical chokepoint for global oil exports.
However, those upside risks are being partly offset by signs that diplomacy is not yet exhausted. US and Iranian negotiators are expected to meet in Geneva later this week, raising the prospect, however fragile, of a negotiated framework that could reduce immediate escalation risk. Even incremental progress toward a nuclear understanding could take some of the geopolitical bid out of crude.
At the same time, broader macro headwinds are reasserting themselves. Renewed tariff uncertainty and rising trade tensions risk dampening global growth expectations, particularly in manufacturing-heavy economies. Slower trade flows and weaker industrial activity would translate into softer oil demand projections, limiting upside momentum.
The result is a market caught between competing narratives: a tightening geopolitical backdrop that supports prices versus mounting concerns that trade friction and policy uncertainty could curb demand growth
