Tensions between the United States and Iran have reached a boiling point. Donald Trump publicly stated that within the next ten days he will decide whether the United States will move forward with a military strike against Iran.
Yes. Ten days.
And the oil market is already reacting as if it smells gunpowder.
THE TALKS
Let’s take things from the beginning. This week, negotiations took place in Geneva regarding Iran’s nuclear program. On the American side, Steve Witkoff and Jared Kushner participated. On the Iranian side, Foreign Minister Abbas Araghchi represented Tehran.
The Iranian foreign minister described the talks as constructive and stated that there was agreement on guiding principles. The market initially took this positively. Oil even declined temporarily, as traders assumed there was room for a deal.
A few hours later, however, JD Vance shifted the tone.
The vice president stated clearly that Iran did not respond to the key red lines set by Trump. In other words, the core disagreement remains unresolved. And when we are talking about a nuclear program, red lines are not minor details.
White House spokesperson Karoline Leavitt confirmed that the two sides remain far apart on critical issues. At the same time, she emphasized that diplomacy remains the president’s first choice, but that there are many reasons one could argue in favor of a military strike.
THE TEN DAY WINDOW
And this is where Trump himself steps in.
In a public statement, he said that it may be necessary to go a step further and that within the next ten days he will make a decision. He also stated that a substantial agreement is needed, otherwise bad things will happen.
This is not simple rhetoric. It is a warning with a clear timeline.
As the statements grow sharper, military activity in the region increases.
The United States has already deployed the aircraft carrier USS Abraham Lincoln to the Middle East. A second carrier, USS Gerald R. Ford, is heading toward the region. At the same time, air presence is being reinforced at a rapid pace. Analysts describe it as a very fast build up of air power, which may serve as pressure for a diplomatic outcome. However, the greater the military presence, the harder it becomes to step back.
On the other side, Iran conducted military exercises in the Strait of Hormuz. It issued warnings about missile launches, and there were reports of temporary navigation restrictions in the strait for security reasons. At the same time, it announced joint naval exercises with Russia in the Gulf of Oman.
And here we reach the point that truly frightens the market.
The Strait of Hormuz is the most critical energy chokepoint in the world. Roughly 20 percent of global oil consumption passes through it. Some estimates suggest that up to one third of seaborne crude exports transit this narrow passage between Oman and Iran.
If there is a serious disruption in oil flows from that route, we are talking about a real supply shock. And that is exactly what the market fears.
OIL
Consider this. As soon as it became clear that the red lines were not met, oil surged more than 4 percent in a single session. Brent crude moved above 71 dollars, while West Texas Intermediate approached 66 dollars. Overall, WTI has risen around 6 percent during the week and more than 15 percent since the beginning of the year.
No war has broken out. But the fear of war has been priced in.
What we are witnessing is the so called geopolitical risk premium. The market is paying for the probability of disruption.
If an agreement is reached within the ten day window, that risk premium will likely shrink and oil could correct lower. If limited airstrikes occur, there may be a short term spike followed by stabilization, provided there is no escalation. However, if there is a serious disruption in the Strait of Hormuz, then we are looking at a sharp rise in prices and significant volatility across all markets.
