Analysts say that despite the Democratic Party's big victory in this week's midterms, which has led to increasing hopes that this conflict will end, the United States and Iran are still sliding towards a new war.
After Vice President JD Vance publicly attributed the Republican Party's crushing defeat to this war, crude oil prices fell by more than 16% over the past five trading days. Vance's remarks also raised doubts about whether there is still support within the government for continuing the conflict with Iran.
The Democratic Party plans to use its solid majority in both houses of Congress to pass a war powers resolution, calling on President Donald Trump to end this war. However, analysts say that the situation in the Middle East has not eased since the election, and moreover, the Democrats will not officially take office until January.
"Throughout the week, we have been shocked by the divergence between our growing concerns about the escalating tensions in the Gulf region and the optimistic sentiment among market participants thousands of miles away who are considering 'exit strategies' due to headline news," said Helima Croft, Global Commodity Strategy Director at RBC Capital Markets, in a report to investors on Friday.
More attacks
According to maritime security agencies, since the elections, several oil tankers near Oman have been attacked, resulting in the death of one seafarer. Iran's ally, the Houthi militia in Yemen, continues to launch missiles at neighboring Saudi Arabia.
Meanwhile, the military buildup in the United States continues, with a third aircraft carrier strike group heading towards the region. The consulting firm Rapidan Energy believes that, with diplomacy at a standstill, the probability of renewed hostilities is 80%.
Trump told reporters on Thursday that he would soon decide whether to attack Iran again.
"If possible, I would prefer not to destroy the rest of this country, but perhaps I will have to," Trump said in the Oval Office, "you will find out soon enough."
"We are ready," said the president, "if we must get things done with Iran, we are very ready to do so."
Price Risk
Rapidan President and former U.S. President George W. Bush's energy advisor Bob McNally stated that once hostilities resume, crude oil prices will once again soar above $100 per barrel. On Friday, the international benchmark Brent crude oil traded at over $97 per barrel, while U.S. crude oil was around $90 per barrel.
On Friday, at the “Squawk Box Asia” program on CNBC, McNally said: ‘President Donald Trump is determined to make preventing Iran from obtaining nuclear weapons and forcing it to abandon its nuclear capabilities a political legacy that he will strive to achieve at all costs.’
"And the Iranian regime is not willing to do so," said this analyst. As long as this core disagreement between the United States and Iran persists, the trend of escalation will continue.
Joe Biden's former energy advisor Amos Hochstein stated that the risk of war still exists, especially since Trump is no longer facing future elections. Hochstein said on Friday in the “Power Lunch” program on CNBC that prices for gasoline, diesel, and aviation fuel will soar as a result.
Iranian mockery
After the election, Tehran has been mocking the Trump administration. The social media account of Iran's supreme leader Mojtaba Khamenei stated that after the results of the mid-term elections were announced, "the process of America's collapse has accelerated."
Moreover, it is unlikely that Congress will pass a war powers resolution before the Democrats take over in January. Even if it is passed, Trump could veto that resolution.
Croft said that the most important leverage for Congress will be the power to allocate funds. She stated that government funding will expire on December 11, and negotiations over another temporary funding resolution could drag on until 2027. This will give the Democrats greater leverage when they come to power in January.
"Importantly, the delay in making the funding decision will not immediately limit Trump's ability to undertake military action, but it could significantly change the government's longer-term financial prospects," Croft told investors.
According to the Qatar National News Agency, Trump spoke by phone with the Emir of Qatar on Friday to discuss diplomatic efforts to ease tensions in the region.
Reuters quoted an unnamed senior Iranian official on Thursday as saying that Tehran has submitted a proposal regarding nuclear issues to the United States through Qatar. The Iranian official told Reuters that Tehran would only discuss this proposal after the United States meets its requirements.
Trump seemed to be dismissive of these diplomatic efforts on Thursday.
“Iran will never possess nuclear weapons,” the president said, “They won’t do anything without our approval. It doesn’t make any difference no matter what they’re watching.”
